Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. Speaker in the Chair]

PRIVATE BUSINESS

PORT OF LONDON BILL

Lords Amendments considered and agreed to.

CITY OF LONDON (VARIOUS POWERS) BILL [Lords]

To be read a Second time Tomorrow.

HUMBER BRIDGE BILL (By Order)

Third Reading deferred till Tomorrow.

PIER AND HARBOUR PROVISIONAL ORDER (GLOUCESTER) BILL

PIER AND HARBOUR PROVISIONAL ORDER (MEDWAY LOWER NAVIGATION) BILL

Read a Second time and committed.

Oral Answers to Questions — ROADS

Fencing (Home-grown Timber)

Sir A. Hurd: asked the Minister of Transport and Civil Aviation what steps he is taking to consult with forestry interests in this country to ensure that suitable supplies of home-grown timber are available for road fencing, in furtherance of the Government's declared policy.

The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. Richard Nugent): We are in consultation with the Forestry Commission and the Home Grown Timber Advisory Committee about a revised fencing specification for motorways in order to permit a wider choice of homegrown timber. The initiative in making suitable supplies of the timber available must, of course, rest with the forestry and timber interests themselves.

Sir A. Hurd: I thank my hon. Friend for that Answer. May we take it that it will as soon as practicable be the policy of the Ministry to give equal opportunities to home producers of timber to supply these fencing posts? In addition to the bodies which my hon. Friend is already consulting, will he also consult the Woodland Owners' Association, which is trying to organise the marketing of home-grown timber?

Mr. Nugent: The answer to the first part of my hon. Friend's supplementary question is "Yes, Sir". Other things being equal, we should naturally wish to use home-grown timber. The answer to the second part of the supplementary question is that if the body which my hon. Friend mentioned wishes to have consultations with us, we shall be very pleased to do so.

Mr. Philips Price: Will the hon. Gentleman try to avoid what happened in Gloucestershire not so long ago where, in an area containing plenty of good oak timber, cement posts were used?

Mr. Nugent: I regret that and will look into the circumstances.

Street Lighting (Trough Fittings)

Mr. Ellis Smith: asked the Minister of Transport and Civil Aviation what consideration he has given to methods of flooding roads with surface light by the use of trough fittings such as are used at airports; and what consultations he has had with the Research Laboratory of the Department of Scientific and Industrial Research on this and other forms of flooding roads with surface light.

Mr. Nugent: Trough fittings are used for street lighting where appropriate. There is close liaison between the Road Research Laboratory and our Department on street lighting matters.

Mr. Ellis Smith: Is the hon. Gentleman aware that when the lighting was first installed in Southampton Row, London, to the admiration of visitors from all over the world, it resulted in large export orders? Will he give an undertaking that consideration will I be given to a similar innovation on the new motor roads?

Mr. Nugent: We are not proposing to put street lighting on the new motorways, but I should certainly like to study the lighting arrangements in the road which the hon. Member mentioned.

Trunk Roads (Schoolchildren)

Mr. Turton: asked the Minister of Transport and Civil Aviation whether he is aware of the increasing danger to children attending schools that are sited on trunk roads; and what action he proposes to take to minimise this peril.

Mr. Nugent: Yes, Sir. The danger increases, of course, as the number of vehicles increases. Action is taken in schools by the provision of road safety training for the children, and on the road by such devices as warning signs, adult patrols, footpaths, guard rails, subways and footbridges. We are also getting under way a national training scheme for those children who cycle to school.

Mr. Turton: Is my hon. Friend satisfied that his Ministry has sufficient direct responsibility in this matter? Is not a great deal of the responsibility with the standing joint committees and education committees of county councils? Will he reconsider the matter, since there is likely to be an increasing danger to children as the rate of traffic increases and as trunk roads are improved?

Mr. Nugent: This is a continuing anxiety for us and my right hon. Friend is quite right in saying that the danger will increase as we have more vehicles. But I do not think that it would be right to take it out of the hands of local authorities and local people on whom we must rely for effective road safety campaigns and the enforcement of road regulations.

Dr. King: As some such siting is inevitable, will the hon. Gentleman consider the provision of subways, since at least half the children involved will necessarily have to cross one of the main roads?

Mr. Nugent: We do that where possible, but subways are very expensive to put under existing roads and we cannot always justify them. However, we always have that in mind as a possible solution in dense urban areas.

White Lines (Regulations)

Mr. G. Jeger: asked the Minister of Transport and Civil Aviation whether he will make a further statement on the working of the new regulations about white lines on main roads.

Mr. Nugent: These regulations have been in force for less than a month and it is too early for us to make a further statement. First reports would seem to indicate that the system will make for greater safety and improved traffic flow.

Mr. Jeger: Has the hon. Gentleman any information about the number of prosecutions which have taken place in infringement of the regulations up to now?

Mr. Nugent: I have no information on that as yet.

Mr. Ernest Davies: Does the hon. Gentleman appreciate the need for being reasonably sparing in the use of these white lines, since there is a danger that there will not be uniformity in their use and that if they are used too much and for different hazards, and so on, they will not be nearly as effective?

Mr. Nugent: Yes, I quite accept the hon. Gentleman's point. Our instructions are that they should not be put down when there is any doubt, or they will otherwise lose their value.

Traffic Signals

Mr. Russell: asked the Minister of Transport and Civil Aviation if he will consider introducing, at suitable road junctions, the system whereby drivers may turn left, after first stopping, even when the traffic signals are red, provided priority is given to pedestrians, in view of the success of similar systems abroad.

Mr. Nugent: We consider that filtration against the red light should not be allowed, except on a green arrow signal. In our opinion general filtration against the red light makes it impossible to give adequate protection to pedestrians.

Mr. Russell: Is my hon. Friend aware that this system works in some other countries? For instance, it is used in New York and Paris, except that the filter is to the right and not to the left, of course. In any case, will he expedite the use of the green filter in cases where he thinks it would work?

Mr. Nugent: Yes, Sir. We always have that point under consideration. Where we can, we do use the green filter. But there are divided opinions about automatic filtering in other countries and it is by no means generally thought to be good.

Mr. J. T. Price: Will the hon. Gentleman resist all attempts to introduce this method of filtering at road junctions? Are not conditions sufficiently bewildering already for pedestrians who already do not know when they may safely cross a road, even when traffic signals are against vehicles? Is he aware that if another complication is introduced, it will be quite beyond the comprehension of pedestrians, particularly elderly people, who often flounder about on crossings even when they think that it is safe to cross when the lights are against the traffic? Will he resist this suggestion as only adding to the dangers to pedestrians?

Mr. Nugent: I think that on the whole it is best to make certain by not following this practice.

Improvements (Hyde Park, Chiswick and Kingston)

Sir F. Medlicott: asked the Minister of Transport and Civil Aviation if he will state the new revised approximate anticipated dates for the completion of the Hyde Park underpass, the Great West Road fly-over at Chiswick, and the fly-over at the Ace of Spades on the Kingston by-pass.

Mr. Nugent: The London County Council is aiming to complete the underpass at Hyde Park Corner by about the middle of 1962; the Chiswick fly-over should be in use in the autumn of this year and the Hook Road underpass on the Kingston by-pass should be completed by early next year.

Sir F. Medlicott: Is not this all terribly slow? Is not it also rather depressing to see the slow way in which the work is progressing on a five-day week basis? Cannot we have work done at night and have a real sense of urgency about the road programme?

Mr. Nugent: No, Sir. It is a most complex business to keep these very busy road junctions going at the same

time as road works are carried out. It is possible to do the work at weekends and by overtime in special cases, but that would naturally increase the cost and would reduce the total volume of work that we can do. We think we get better value this way.

London-Yorkshire Motorway

Mr. Wade: asked the Minister of Transport and Civil Aviation what progress he has to report on the construction of the new motorway from London to Yorkshire.

Mr. A. Roberts: asked the Minister of Transport and Civil Aviation (1) when he expects the London-Yorkshire motor road to be completed;
(2) what further progress has been made in determining the route of the London-Yorkshire motor road through Leicestershire.

Mr. Nugent: We expect that the carriageways of the London-Birmingham motorway, which is the first section of the London-Yorkshire motorway, will be completed by the end of October. As far as the extension to Yorkshire is concerned, I cannot yet add to my right hon. Friend's reply on 13th May to the hon. Member for Leicester, North-West (Mr. Janner).

Mr. Wade: In respect of Yorkshire, does the Minister appreciate that his Ministry appears to be progressing backwards? In the first place, it was proposed that there should be a new road through the West Riding, to be linked with the new London-Yorkshire motorway. I understand that that has been dropped from the Minister's scheme. Now we have a serious setback with the London-Yorkshire motorway. Can the Minister state a specific date by which time some progress will be made from Birmingham onwards, either by the original or by some alternative route?

Mr. Nugent: First, we have to decide what will be the line of the motorway and, as the House knows, we have had great difficulty in fixing the line through Leicestershire. Until that is done it is quite impossible to take a view as to when the work may start, but we are proceeding as fast as we can in order to try to decide where that line should be.

Mr. Roberts: Does not the Minister agree that this delay is causing great consternation in the West Riding? Does he realise that it is no use talking about 100 m.p.h. motorways when we have a 5 m.p.h. Administration? Will he consider routeing the London-Yorkshire motorway through the western part of the Charnwood Forest? If the Government will accept that route a commencement could be made during the coming November.

Mr. Nugent: It could not, because we have many statutory obligations to fulfil before that. The western route through the Charnwood Forest, as I have said previously, has grave objections in regard to its alignment both vertically and horizontally, and also because of the extra cost involved over other routes. For those reasons, I am afraid that I cannot encourage the hon. Member to think that his suggestion can be regarded as an easy solution.

Sir M. Stoddart-Scott: Will the Minister knock the heads of the local authorities of Leicestershire together and, if they cannot come to an agreement, make the decision himself in order that the North shall not be deprived of the advantages of having a motorway?

Mr. Nugent: My hon. and gallant Friend has already derived some advantage from the improvement in the Great North Road.

Mr. Roberts: On a point of order. In view of the Minister's very unsatisfactory reply, I beg to give notice that I shall raise this matter at the earliest opportunity on the Adjournment.

Lancaster By-Pass—Penrith

Mr. Holt: asked the Minister of Transport and Civil Aviation (1) if he will inquire into the practicability by tunnelling and road surface heating of rebuilding the trunk road, A.6, over Shap to motorway standards, and so connecting Penrith to the northern end of the Birmingham-Lancaster motorway;
(2) if, in view of the damage to the countryside which will be caused by the building of a motorway through the Lune Valley, he will state the relative costs per mile of this project and the

conversion of the Shap A.6 trunk road to motorway standards.

Mr. Nugent: My right hon. Friend is proceeding with his consideration of a motorway extension from the Lancaster by-pass to Penrith. All the various possibilities, including relative costs and the effect on amenities, will be taken into account.

Mr. Holt: When the Minister has given this matter his full consideration will he make a long and full statement on the subject, as there is great concern among many people in the North at the suggestion that this motorway should go up through the Lune Valley rather than that the Shap Road should be developed into a motorway?

Mr. Nugent: I shall certainly take note of the hon. Member's statement and, in due course, when the review has been completed—and it will take some time—we will make a statement about it.

Motorways (Planning)

Dr. King: asked the Minister of Transport and Civil Aviation if he will include representatives of the Royal Institute of British Architects in his planning teams for the new motorways.

Mr. Nugent: For the national motorways, my right hon. Friend already has the benefit of the expert advice of the Advisory Committee on the Landscape Treatment of Trunk Roads, some of whose members are architects. The Royal Fine Art Commission is also consulted about the principal architectural features of these roads, and consultant architects are appointed to collaborate in the design of the major bridges. These arrangements work well, and I do not think that anything further is required.
In the case of urban study groups the position remains as stated by my right hon. Friend in his reply to the hon. Member for Ilford, North (Mr. Iremonger) on 29th April, 1959.

Dr. King: Is the hon. Gentleman aware that, although the planning of new motorways is primarily a matter for the road and traffic engineer, the architect has a contribution to make in regard to the preservation of urban and rural amenities, good design and general planning? Will he give further consideration


to the request of architects that representatives should be appointed on the various urban motorway planning groups?

Mr. Nugent: I agree with the hon. Member that we should have full regard to the preservation of amenities, and when hon. Members and the whole community see the new motorway to Birmingham I think that they will agree that we have been successful in that. We have two architects on the Advisory Committee on the Landscape Treatment of Trunk Roads, and I think that we have fully taken account of just those considerations mentioned by the hon. Gentleman.

"Clearway" Experiment

Sir F. Medlicott: asked the Minister of Transport and Civil Aviation what progress he has made in the preparation of plans for designating certain roads as throughways in London and other cities; how soon he anticipates being able to make such plans operative; and if he will make a statement.

Mr. Nugent: We are planning to start the first clearway experiment later this summer on selected lengths of trunk road in country areas. If it is successful, we shall seek the advice of the London and Home Counties Traffic Advisory Committee on extending the experiment to the London Traffic Area. In other cities the responsibility for making the appropriate Orders would rest with the local authorities.

Sir F. Medlicott: Is the Minister aware that the great virtue of this proposal is that it recognises that the highways are intended for vehicles to move on and not just to stand still on? As in traffic matters it is not possible to please all the people all the time, may I ask the Minister not to be dissuaded by the loud cries of protest which this experiment may evoke?

Mr. Nugent: On the whole, it has had a rather good reception.

Oral Answers to Questions — TRANSPORT

Motor Vehicles, Wales

Mr. Gower: asked the Minister of Transport and Civil Aviation the total number of licensed private motor cars in Wales at the latest convenient date; the

numbers in 1949 and in 1939, respectively; and the estimate of the total number which will be licensed in Wales in 1969.

Mr. Nugent: The number of motor cars licensed in Wales and Monmouthshire in the September quarter of 1958 was 221,669. The corresponding figures for 1938—figures for 1939 are not available—and for 1949 were 81,320 and 98,972 respectively. On the assumption that this rate of increase continues there will be about 370,000 by 1969.

Mr. J. Griffiths: Will the hon. Gentleman be more generous with road grants to enable these cars to move?

Mr. Gower: asked the Minister of Transport and Civil Aviation how many mechanically propelled vehicles of all kinds and all descriptions were licensed in Wales at the latest convenient date; the numbers in 1949 and in 1939, respectively; and his estimate of the number which will be licensed in Wales in 1969.

Mr. Nugent: The number of motor vehicles licensed in Wales and Monmouthshire in the September quarter of 1958 was 384,842. The corresponding figures for 1938—figures for 1939 are not available—and for 1949 were 133,542 and 199,904 respectively. On the assumption that this rate of increase continues there will be about 600,000 by 1969.

Mr. Gower: Is my hon. Friend aware that the opinion is held in Wales and expressed frequently in the Press and elsewhere that the Government road programme is not sufficiently ambitious to deal with this great increase in the number of vehicles, and that the opinion also seems to be held that the share of the present programme which is accruing to Wales is inadequate? Will my hon. Friend comment on these opinions?

Mr. Nugent: I think that that portion of our road programme which is going to Wales is certainly a fair one on the whole, particularly in South Wales, and my belief is that our road programme will substantially provide for these large numbers of vehicles.

Motor Vehicles (Noise)

Mr. de Freitas: asked the Minister of Transport and Civil Aviation whether he will inquire into the practicability


of taxing motor vehicles in such a way as to take account of the noise they cause.

Mr. Nugent: I am afraid that the taxation of motor vehicles on a noise basis is not a practical proposition.

Mr. de Freitas: Is the hon. Gentleman aware that I am not suggesting the comparison of a very noisy motor cycle with a relatively silent Rolls-Royce? I am suggesting that there should be a financial incentive to manufacturers and users of very noisy vehicles, such as motor cycles, to make less noise and to have the machines designed in that way.

Mr. Nugent: I do not disagree with the thought behind the hon. Gentleman's suggestion, but it would be difficult to make progress in that way. I think that we must content ourselves by trying to make progress with more effective regulations about noise—and I think that there is a later Question about that—and enforcement.

Mr. de Freitas: asked the Minister of Transport and Civil Aviation (1) what progress has been made in the study of the means by which the noise of motor vehicles can be reduced;
(2) what method is being used by his Department to measure the sound of motor vehicles.

Mr. Nugent: Our Department and the Department of Scientific and Industrial Research are at present studying the best means of measuring noise from motor vehicles. This study includes ambient noise from buildings and so on. I cannot yet say when the results of the study will be available.
Meanwhile we have agreed with the manufacturers of new motor cycles conditions of test and recommended noise limits. I am sending the hon. Member a copy of this information.

Mr. de Freitas: I am very glad about the Minister's agreement with the manufacturers of motor cycles, but can the hon. Gentleman tell us whether the manufacturers will abandon their policy of making motor cycles deliberately and unnecessarily noisy so that they might please the local "milk bar cowboys" who ride these machines to give them a sense of power? Further, can the hon. Gentleman say whether the tests will

distinguish between the noise of a heavy, rather powerful bus engine, and the staccato noise of a very much lower powered engine such as that of a motor cycle?

Mr. Nugent: The hon. Gentleman has asked a supplementary question which really pinpoints the difficulty of measuring noise. The nuisance of noise does not depend entirely on volume, but on the kind or tone of the noise. To date nobody has found any means of defining that. With regard to the first part of the hon. Gentleman's supplementary question, the manufacturers of both motor cycles and motor cars are very co-operative and anxious to bring their machines down to a reasonable noise level. Most of the trouble of noise is caused by those who buy these machines and remove most of the silencing equipment.

Driving Tests, Gainsborough

Mr. Kimball: asked the Minister of Transport and Civil Aviation if he is aware of the long waiting list for driving tests in Gainsborough; and if he will arrange for the number of days his examiners test in Gainsborough to be increased.

Mr. Nugent: Yes, Sir. We are at present recruiting additional examiners, and when they are available we intend to arrange for more tests to be carried out at Gainsborough.

Rural Transport Committee

Sir A. Hurd: asked the Minister of Transport and Civil Aviation if he will appoint a member of the Women's Institute to the committee which is to inquire into the problems of rural transport services; and if the committee will be authorised to examine the working and finance of the post omnibus services in Switzerland and elsewhere.

Mr. Nugent: The membership of the committee is not yet settled, but I will bear in mind my hon. Friend's suggestion. As regards the second part of the Question, its terms of reference are wide enough to include such a study if it wishes.

Sir J. Duncan: asked the Minister of Transport and Civil Aviation to what extent the committee to inquire into the


problem of rural omnibus services will be able to include inquiries into services in Scotland; how many Scottish members there will be on the committee; and what are their names.

Mr. Nugent: It is our intention that the committee should cover Scotland as well as England and Wales, and my right hon. Friend the Secretary of State for Scotland is being consulted about representation.

Sir J. Duncan: Will my hon. Friend allow the committee to visit parts of Scotland, because the problem is different in different parts of the country and the only way to get a proper solution will be for the committee to take a regional view of it?

Mr. Nugent: I accept that the problem differs in one part of the country compared with another, and the committee will be quite free to go to any part it wishes.

Accidents (Seat Belts and Harness)

Mr. Strauss: asked the Minister of Transport and Civil Aviation whether he will now take steps to publicise the value of safety belts and harness in preventing injuries from car accidents.

Mr. Nugent: The British Standards Institution is actively pursuing the framing of a standard specification for seat belts and harness; pending its adoption it would be premature to undertake a public campaign to encourage their use.

Mr. Strauss: That may be so. Is the the Joint Parliamentary Secretary aware that Cornell University initiated a research study into this matter and found that no less than 60 per cent. of the injuries resulting from car accidents could be avoided if seat harness and belts were generally adopted? In view of that very striking figure, will he take the earliest opportunity, as soon as the work of the Institution is completed, to publicise this fact and to embody it in all road safety campaigns?

Mr. Nugent: Yes, Sir, certainly. I accept that if all drivers and passengers wore harness which was fully effective, it would save a large number of injuries. But to achieve this the harness must be fully effective both in itself and in its attachments and it must be univer-

sally used. As soon as we have standards we will give the matter the fullest possible publicity.

Road Accidents

Mr. Lipton: asked the Minister of Transport and Civil Aviation the principal reasons which account for the fact that 456 persons were killed in road accidents during April, 1959, compared with 416 in April, 1958.

Mr. Nugent: The increase in fatal accidents in April, 1959, compared with April, 1958, was mainly in respect of pedestrians and cyclists. It is difficult to draw general conclusions from a period as short as a month.

Mr. Lipton: Will the Parliamentary Secretary take note of the fact that whereas the road traffic has increased during the months in question by 4 per cent. the number of people killed or injured is three or four times as great? When is something to be done to prevent this dismal progress whereby the number of casualties increases to a far greater extent than the amount of road traffic would justify?

Mr. Nugent: I accept that there was an increase of only 4 per cent. in the amount of traffic but I would point out that in the first four months of 1959 the number of fatalities showed a reduction compared with 1958. The periods are too short to show the general trend. It would be wrong to leave the impression that there is not a great deal being done to promote the cause of road safety and to make the roads safer. But it is most important that we should make the public aware of its responsibilities. We can do our part, but we need the cooperation of drivers and pedestrians.

Central London (Staggered Hours)

Mr. Lipton: asked the Minister of Transport and Civil Aviation what progress has been made in staggering hours of work in Central London.

Mr. Nugent: The London Travel Committee has set up a special working group to promote the wider adoption of staggered hours. The group has continued the valuable work of the "Crush Hour" Committee and is at present completing a survey of starting and finishing times of some 500,000 workers in Central


London to show where staggering may be most needed and most likely to be fruitful.

Mr. Lipton: Would not the Joint Parliamentary-Secretary agree that we have far too many committees which are not achieving very much? Has the Minister tried in recent weeks to cross Central London during the rush hour? Will he accept my suggestion that all this talk about the alleged staggering of hours has not made a ha'porth of difference?

Mr. Nugent: It has made some difference, but it is a difficult matter to alter the pattern of life of a large number of people. I am sure that the suggestion that we should legislate to deal with the matter, which the hon. Gentleman has made before, is wrong. We must get co-operation, and I hope that we shall get it in this way.

Driving Tests, Orkney and Shetland

Mr. Grimond: asked the Minister of Transport and Civil Aviation if he will arrange for some local men or women to be trained as driving testers in Orkney and Shetland.

Mr. Nugent: Driving and traffic examiners arc selected for appointment through open competitions by the Civil Service Commissioners. If any candidate from Orkney or Shetland is found suitable for appointment we will certainly consider him for any vacancies in the North of Scotland.

Mr. Grimond: Does not the hon. Gentleman think that the present situation in which people have to wait sometimes ten months for a test is both extremely inconvenient for local people and expensive because of the need to send up testers? Could not he consult the police and local authorities to see whether some special arrangement could be made?

Mr. Nugent: As I said last week, I think that our arrangements for the future will be better when we have recruited new examiners, or rather when we have in post the new examiners whom we are in process of recruiting.

Road Traffic Acts (Enforcement)

Mr. Ernest Davies: asked the Minister of Transport and Civil Aviation if, in view of the growth in the number of goods vehicles on the roads and the anticipated further increase, he will increase the number of officers engaged full-time on enforcement of the provisions of the Road Traffic Acts relating to goods vehicles and public service vehicles.

Mr. Nugent: The complement of full-time traffic examiners for enforcement is 100, of whom 95 are in post. In addition 17 driving and traffic examiners are now engaged on enforcement work. This number will be increased to 50 as soon as possible.

Mr. Davies: Does the hon. Gentleman recall that he has always given the undertaking that there will be an increase, and that the increase does not take place to any extent? Does he also recall that when I last raised this matter he said that the number of offences was increasing in proportion to the number of vehicles on the road? Does the hon. Gentleman still believe that the staff of 100 enforcement officers is sufficient to cope with those offences?

Mr. Nugent: I do not agree that there is an increase.

Mr. Paget: Does the hon. Gentleman take the view that motoring offences are inclined to increase in proportion to the number of traffic police?

Mr. Nugent: No. I think the reverse is the case.

"No-Waiting" Ban

Mr. Ernest Davies: asked the Minister of Transport and Civil Aviation what conclusions have been reached by the London and Home Counties Traffic Advisory Committee as a result of the study it undertook to make of traffic conditions at those sites where a ban on loading and unloading was postponed until experience had been gained of the extension of the hours during which a "no-waiting" ban was in operation; and whether it is now proposed to impose such a ban.

Mr. Nugent: The Advisory Committee has not yet completed its further


study of conditions at the twenty-three sites where loading bans were proposed. It is at present considering whether practical trials may be necessary, and we hope to have its advice on this point within the next few weeks.

Mr. Davies: As it is now twelve months since the hours of "no-waiting" were extended to start at 8.30 a.m., and since the position has not improved so far as loading and unloading is concerned—one often comes across double parking in central London—will the Minister take steps to increase the ban on loading and unloading?

Mr. Nugent: I certainly think this is a matter which must be pursued. We have been investigating it. The reason for rejecting the proposal before us was that there was not sufficient information to justify the action involved. There have been inquiries by the police and the divisional road engineer. The outcome of them is the consideration which I have mentioned. I hope that we shall have something definite to go on quite soon.

Oral Answers to Questions — SHIPPING

Manchester Ship Canal

Mr. Ellis Smith: asked the Minister of Transport and Civil Aviation if he will move to appoint a Select Committee, or set up a Departmental Committee, to investigate and report on the need to modernise the Manchester Ship Canal with special reference to finance, the need to cater for larger and modern ships, new locks, lighting, port facilities, new quays at Barton Docks Estate, and other places, and the need to link up the Ship Canal with the large industrial area in a modern form.

The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. John Hay): These are matters for the Manchester Ship Canal Company and I see no grounds for such a committee.

Mr. Ellis Smith: Is the hon. Gentleman aware that some of us were employed on dieselisation and electrification equipment for railways all over the world, continuing at that work for years while seeing our own railways become out of date? Will he stand idly by and

allow that sort of thing to happen to undertakings like the Manchester Ship Canal?

Mr. Hay: No, Sir. It would not happen with the Manchester Ship Canal at all. Since the Canal was first instituted, some £27 million have been spent on its development, including £13 million spent since the war. We work fairly closely with the company, and our information is that the company is using every opportunity it can find to modernise and re-equip the port wherever it can. As I said in the Answer, we see no reason to have an inquiry as the hon. Member suggests.

New Cunard Liners

Dame Irene Ward: asked the Minister of Transport and Civil Aviation whether in view of the announcement by the Cunard Company of their proposals for the replacement of the "Queen Mary" he will give an assurance that no commitments for a subsidy will be entered into before the terms have been announced to Parliament.

Mr. Beswick: asked the Minister of Transport and Civil Aviation if, before making a final decision about financial aid to the Cunard company for the building of any new vessel, he will make a statement to the House about the proposed terms on which such financial aid is given.

Mr. Hay: Any financial assistance which the Government might decide to give to the Cunard Company would require legislation and this would obviously have to come before the House. But I must emphasise that no decision has been taken on what form any such assistance might take or whether it should be given.

Dame Irene Ward: While thanking my hon. Friend for that very satisfactory reply, may I ask him to bear in mind, so that it may be on the record, that in my view the country could not stand too much money being tied up on one river?

Mr. Hay: I will take the fullest account of the views of my hon. Friend.

Mr. Beswick: I am sure the Parliamentary Secretary will be aware that my hon. Friends will also be pleased to hear


that the terms under which financial assistance will be given to this company will be announced to the House. In view of the request made, can the Parliamentary Secretary say why the Institute of Directors has been so agitated at the Labour Party's proposal to give financial assistance to certain companies?

Mr. Hay: I do not answer for the Institute of Directors.

Howden-Jarrow Ferry

Dame Irene Ward: asked the Minister of Transport and Civil Aviation whether in view of the periodical breakdown of the Howden-Jarrow ferry, he will order an inquiry into the facilities available for cross-river communications in order to maintain regular work on the River Tyne.

Mr. Nugent: I am aware that inconvenience has been caused from time to time by the withdrawal of the ferry boat for various reasons. Alternative routes for cars are of course available and pedestrians and cyclists can use the existing tunnel. In our view the real answer to this problem is the building of the new tunnel; in the meantime I am getting into touch with the two county councils concerned to consider what can be done to keep the ferry in satisfactory service during the intervening period.

Dame Irene Ward: While thanking the Joint Parliamentary Secretary for his Answer about this ridiculous old ferry, may I ask him to be so kind as to say that a shot in the arm is coming to the responsible authorities in order that frustration and irritation on Tyneside may be relieved?

Mr. Nugent: I will not say whose arm is to have the shot in it, but I will do my best about it.

Oral Answers to Questions — CIVIL AVIATION

Captain Thain (Letter)

Mr. Remnant: asked the Minister of Transport and Civil Aviation why a copy of his letter to Captain Thain dated 12th March, 1959, was sent by his Department to the pilot's employers.

Mr. Hay: Because the matter was one of direct concern to British European

Airways the Corporation was told informally of the action my right hon. Friend had in mind about the renewal of Captain Thain's licence and in confirmation a copy of his letter of 12th March, 1959, was sent to it.

Mr. Remnant: Does not my hon. Friend agree that a pilot's licence is a matter of direct concern between the pilot and the Minister? Will he make inquiries to confirm views, subsequent to those of the Minister a few weeks ago, that this would not prejudice the pilot's case? The public does not agree with that view and will he take the public attitude as a guide to his future conduct in such matters?

Mr. Hay: My hon. Friend perhaps forgets for the moment that the Minister is responsible for the air Corporations, including British European Airways, who are obviously extremely concerned with the findings of this Report. As my hon. Friend will also know, we are setting up a special reviewing body, about which there is a later Question, to look into all the representations which Captain Thain has made.

Mr. Beswick: Is the hon. Gentleman aware that he is quite wrong in introducing the Department into the matter as, as he put it, a part employer through the Corporations? The question of certification of a pilot is a direct relationship between the pilot himself and the Department. Although it is of concern to the Corporation as to whether a pilot holds a certificate, any doubts which the Department may have in the meantime are not matters which should concern the Corporation.

Mr. Hay: That may well be so, but, as I said in reply to my hon. Friend, my right hon. Friend felt that here was a particularly important matter to be brought to the attention of the Corporations. We are looking into the whole thing and I hope that the outcome will be satisfactory.

Munich Air Crash

Mr. Remnant: asked the Minister of Transport and Civil Aviation whether he has yet been informed whether the German inquiry into the Munich air crash will he reopened.

Mr. Hay: No, Sir; but I hope to know within a few weeks.

Mr. Remnant: Will my hon. Friend announce the action he is taking about a later Question, or does he maintain his point of view that he will await the report of the reviewing body?

Mr. Hay: I am not quite clear about the rule on anticipation of Questions. As I said earlier, there is a later Question on the Order Paper and I think that my hon. Friend had better await the Answer to that.

Dundee Union of Boys' Clubs (Charity Event)

Mr. G. M. Thomson: asked the Minister of Transport and Civil Aviation why the Dundee Union of Boys' Clubs has been charged £7 19s. 6d. for the expenses of the attendance of one of his officials at a fund-raising event for charity at Errol Aerodrome on 17th August, 1958, when on a previous occasion £1 17s. 9d. was charged.

Mr. Hay: On the earlier occasion our representative, who was stationed at Dyce, used his own private car for the journey but generously restricted his mileage claim to a rate of only 2d. a mile. On 17th August, 1958, official transport, costing substantially more per mile, had to be used and the charge made was that necessary to defray the expenses falling on public funds on that occasion, namely the regulation mileage rate for the distance involved together with the normal subsistence allowance.

Mr. Thomson: Is the Joint Parliamentary Secetary aware that the original charge was more than twice the present charge and that this was reduced only after my representations? Is he aware that the present unsatisfactory reduction is a charge for a little local journey that would have paid for a return fare for this official from Dundee to London.

Mr. Hay: No, Sir. I suggest that the hon. Gentleman is quite wrong. The position is that we calculated the original charge on a mileage rate which was subsequently found to be not the one appropriate to this particular journey. As a result, the figure was reduced. The hon. Gentleman knows that this was not a little local journey. I understand that Errol is about half-way between Turn-house and Dyce aerodromes and some 90 miles by road from Dyce. This was

not a journey that could be done as simply as the hon. Gentleman suggests.

Mr. Thomson: On a point of order. In view of the unsatisfactory nature of the reply, I give notice that I will raise the matter on the Adjournment.

Aerodromes (Trading Accounts and Management)

Mr. Beswick: asked the Minister of Transport and Civil Aviation to what extent he now expects to meet the recommendation of the Select Committee on Estimates in Session 1955–56 that trading accounts be produced for his Department's aerodromes; when he expects to make such information available; and if he will make a statement.

Mr. Hay: Accounts for the year 1958–59 are in course of preparation which will show separately the trading results of the Ministry's three principal aerodromes and a consolidated figure for the others. It is hoped that these accounts will be submitted to the Comptroller and Auditor-General in the early autumn.

Mr. Beswick: Can the Joint Parliamentary Secretary say that the information given in these accounts goes all the way to meet the recommendations of the Select Committee?

Mr. Hay: I think I can say that we are going as far as possible to meet the request made by the Committee.

Mr. Beswick: asked the Minister of Transport and Civil Aviation if, in view of the technical developments in the operation of aerodromes since the war, and of the increasing tendency to administer them on a commercial basis, he is satisfied that the present managerial structure and general policy on personnel recruitment and promotion is best suited to present needs; and if he will consider the appointment of an appropriate independent committee to study and make recommendations on these matters.

Mr. Hay: My right hon. Friend considers that there is scope for variety in this matter. Wherever it seems appropriate, he is encouraging local authorities to take over the management of local aerodromes. In other cases where it seems best that aerodromes remain


under State control, his policy is to keep the managerial and staffing structure under constant review and to adapt it to the changing needs, including the commercial needs, of the current situation. He sees no difficulty in achieving this policy within the existing departmental framework. The answer to the last part of the Question is, therefore, "No, Sir".

Mr. Beswick: Is the Parliamentary Secretary satisfied that the changes which have taken place so far have met the changed character and size of the problem of administering an airport like London Airport? As an illustration of the sort of thing I have in mind, may I ask whether he is satisfied that technical people recruited for, say, air traffic control, can under the present set-up, work their way through to the top? Or is the position that executive heads come only from the Ministry?

Mr. Hay: I think that the arrangement, which is admittedly to some extent experimental, is working extremely well. In these days it is not easy to manage these enormous complexes which ate modern airports, but I think that we are having some degree of success. As I said in my Answer, we shall have to be guided by our experience.

Captain Thain (Independent Review)

Sir L. Heald: asked the Minister of Transport and Civil Aviation whether he will now state the composition and terms of reference of the independent body being set up to review Captain Thain's representations about the Munich air crash.

Mr. Hay: My right hon. Friend has now arranged that the independent review into representations by Captain Thain shall be conducted by Mr. E. S. Fay, Q.C., Chairman, Professor A. R. Collar, and Captain R. P. Wigley, Assessors. Since the terms of reference are rather long, I will, with permission, circulate them in the Official Report. The date for the hearing will be arranged by the Chairman of the reviewing body after consulting Captain Thain and his representatives.

Sir L. Heald: Is this investigation taking place under any statutory regulation or rule, or is it on an ad hoc basis

of officials and witnesses? Secondly, will the proceedings be public and the report published?

Mr. Hay: I am advised that these are ad hoc proceedings which have been instituted in this rather difficult case. In regard to the second part of the question, we feel that this is a matter for the reviewing body itself to consider, after hearing the views of Captain Thain and his representatives.

Mr. Remnant: The hon. Gentleman did not say whether the report would be published, but will he give us an assurance that Captain Thain will be able to call all the evidence he wishes?

Mr. Hay: He will, of course, be able to call any witnesses and put forward his views. As to the publication of the report, I am afraid I should need notice of that question. We shall give every consideration to the question of publication.

Mr. Beswick: When the hon. Gentleman is considering the form of the inquiry, will he keep in touch with the British Air Line Pilots' Association?

Mr. Hay: Yes. We keep in touch with that body and bear in mind the representations it made at a very early stage.

Following are the terms of reference of the independent review:
To consider the representations made by and on behalf of Captain Thain with regard to the accident to B.E.A. Elizabethan G-ALZU at Munich on 6th February, 1958: and. having regard to those representations and to the Report of the German Commission of Inquiry on the said accident, to report to the Minister whether or not in their opinion Captain Thain took sufficient steps

(a) to satisfy himself that the wings of the aircraft were free from ice and snow;
(b) to ascertain in the conditions prevailing at the time the runway was fit for use; and
(c) to ascertain the cause of the difficulties encountered on the first two attempts to take off before making a third attempt.

Oral Answers to Questions — RAILWAYS

Superannuitants

Mr. Ridsdale: asked the Minister of Transport and Civil Aviation what official view has been expressed to him as a result of the British Transport Commission's reconsideration of its pension


supplement scheme; and if he will make a statement.

Dame Irene Ward: asked the Minister of Transport and Civil Aviation if he will give an assurance that no additional financial resources will be made available to the British Transport Commission which do not include some financial provision out of which pensions increases on the same basis as that made to Crown servants can be paid to railway superannuitants.

Mr. Nugent: The Commission has reviewed the matter very carefully and has reluctantly come to the conclusion that because of its present financial situation it cannot incur any additional expenditure for improving pension supplements. Superannuation arrangements are matters which we must regard as the responsibility of the British Transport Commission. In view of its statutory financial obligations we must have regard to what in its judgment it can afford to do.

Mr. Ridsdale: Is my hon. Friend aware that many of the railway superannuitants for whom I am pressing for a pension increase are old employees of the Harwich to the Continent steamship service who served well in the past, as their successors are doing now? Would not my hon. Friend agree that failure to award an increase in pension to those who contributed towards it cannot but be detrimental to the long-term efficiency of the transport services?

Mr. Nugent: I am only sorry that we cannot help more.

Dame Irene Ward: Will my hon. Friend bear in mind that I think nothing of industrialists, whether in nationalised or private industries, who do not do the right thing by old loyal servants? Will he also bear in mind that I personally would much prefer to pay to our old railway servants some of the money which is going to the cotton industry?

Mr. Nugent: I think Sir Brian Robertson is no less conscious than my hon. Friend of the humanitarian considerations, but he has his statutory responsibility to discharge, and that he is trying to do.

Mr. Ernest Davies: Does not the Parliamentary Secretary agree that the Commission is acting meanly in this

respect? Does he realise that what is happening is that pensioners are in effect subsidising the British Transport Commission? The British Transport Commission is being heavily subsidised at the present time and here one particular section of ex-employees is being asked to carry the burden also.

Mr. Nugent: The British Transport Commission has a statutory responsibility to make its accounts balance, taking one year with another. The estimated deficit is now between £80 million and £90 million a year, and clearly the Commission's first obligation is to bring its accounts into balance before it can do something which is quite outside its statutory responsibility.

Dame Irene Ward: The Commission wastes a lot of money.

Mr. P. Noel-Baker: Is it not shortsighted policy to reward the loyalty of old servants by treating them so meanly?

Mr. Nugent: I cannot accept that they are being treated meanly. The Commission would like to increase pensions if it could, but it has not the means for doing so.

Sir G. Nicholson: In the view of the general public, not to speak of the superannuitants, these people are former State employees although they may not be so in a technical sense. Will the Parliamentary Secretary bear in mind that it does not speak well of the State if, when economies have to be made in a nationalised industry, a lot of the burden falls on former servants who did good service when the railways were in private hands?

Mr. Nugent: I am aware of that and have been told about it before by hon. Members. I am sorry that it is not within the means of the Commission to help these people at present.

Mr. Ridsdale: In view of the unsatisfactory nature of the reply, I give notice that I shall raise the matter on the Adjournment at an early opportunity.

Later—

Dame Irene Ward: I appreciate that Question No. 25 has been answered, but may I ask another supplementary question?

Mr. Speaker: No. The hon. Lady asked a supplementary question at the time.

Modernisation Programme (Reappraisal)

Mr. Ernest Davies: asked the Minister of Transport and Civil Aviation when the Report and Accounts of the British Transport Commission and the report on the reassessment of its modernisation programme will be published.

Mr. Strauss: asked the Minister of Transport and Civil Aviation whether he has yet studied the reassessment of the financial prospects of the railways announced by the Chairman of the British Transport Commission.

Mr. Nugent: The Report and Accounts will be published towards the end of this month. We have not yet received the Commission's reappraisal of the railways' modernisation plan and financial prospects, but I understand it should be ready in the next few weeks.

Mr. Davies: Can the Minister state what form the report and reappraisal will take? Will it also contain the Government's views, as was the case when the proposals with regard to the railways were presented to the House? Further, can the hon. Gentleman give an assurance that there will be an opportunity for debate before any final decisions are taken, following the publication of the reappraisal, in view of the possibility of further cuts in services?

Mr. Nugent: We have not yet seen the reappraisal, so I am not able to say in what form it will be published. I cannot say more today than that it will be published as soon as possible, in order to meet the convenience of the House. As for the second part of the supplementary question, I have taken note of the point that the House would wish to have a chance to debate the report—I assume it would like to do so before we rise for the Summer Recess—and we will endeavour to meet that timetable.

Mr. Strauss: In view of the obvious undesirability of frequent changes in the modernisation programme, can the hon. Gentleman give an assurance that there is no truth in the categorical statement

in the Sunday Times that it is the Government's intention now to rephase that programme, and also the categorical statement in that newspaper that the Government propose to carry out an overall slimming process in the railway organisation, and to sell off the more profitable activities of the Commission to private interests?

Mr. Nugent: At the present time we are not contemplating any of those steps. Naturally we wish to see the Commission's reappraisal before forming any view of what should be done further in regard to the existing modernisation plan.

Wagon Building and Repair Shops

Mr. A. Roberts: asked the Minister of Transport and Civil Aviation, what general directions he has given to the British Transport Commission regarding the closure of wagon building and repair shops in various parts of the country.

Mr. Nugent: None, Sir. This is a matter of management and therefore the responsibility of the British Transport Commission.

Mr. Roberts: Is the hon. Gentleman aware of the uneasy feeling which is apparent in places like York, Doncaster and Shildon? Can he inform the House whether there is a likelihood of this work being farmed out to private contractors?

Mr. Nugent: I am well aware of the uneasy feeling, and hon. Members have made representations to my right hon. Friend and myself; but I can also tell the House that representations have been made from the other side, on behalf of private employers, who, unfortunately, must also find their activities cut down. I can reassure the hon. Member that in the reductions which are inevitably part of its modernisation programme—including such things as the manufacture of wooden wagons and their repair which, naturally, must disappear altogether—the Commission is being as fair as possible regarding its own workshops and those of private suppliers.

Mr. F. Noel-Baker: Will the Joint Parliamentary Secretary bear in mind that what he has just said will tend to


unsettle even more railway workers who are affected by the situation? Will he please bear in mind the desirability of allowing many thousands of railway workers to know exactly what is to happen in the future? At the moment they are in complete ignorance and are apprehensive about the future. Is it not time that something was done to tell them what are the future plans?

Mr. Nugent: The Commission is in close consultation with the unions on this matter. They have settled what I believe to be satisfactory arrangements regarding redundancy, and I think there is full consultation.

Mr. Lawson: Will the Minister bear in mind that Scotland has a long history of wagon building and repair? Will he ensure that in the developments now taking place Scotland is not stripped of one of her industries connected with wagon building and repairing?

Mr. Nugent: I am sure that the Commission will also pay attention to that point.

Oral Answers to Questions — MINISTRY OF DEFENCE

N.A.T.O. (Forces)

Mr. Shinwell: asked the Minister of Defence (1) the present strength in numbers of the West German forces available to the North Atlantic Treaty Organisation, giving the number for each arm respectively;
(2) the total strength of ground troops in the North Atlantic Treaty Organisation forces giving the contribution from each of the member countries.

The Minister of Defence (Mr. Duncan Sandys): I am afraid I am not free to publish information obtained from N.A.T.O. about the armed forces of other countries.

Mr. Shinwell: What is the reason for this secrecy? In view of the optimistic and glowing statement about the strength of the N.A.T.O. forces made recently by the Supreme Commander and others associated with N.A.T.O., is not it desirable that the public should be informed whether this statement is correct? Will the West German forces be armed with atomic weapons? What contribution have the French Government made to N.A.T.O.? Are they

making any contribution in regard to any of the Services at the present time?

Mr. Sandys: The right hon. Gentleman has asked me rather a mouthful. On secrecy, it is just a matter of normal practice in order that when confidential information about the size of forces is communicated to N.A.T.O. by a country, and circulated by N.A.T.O. to other Governments concerned, the information shall not be broadcast.

Mr. Shinwell: How are we to get this information, in view of the optimistic statements that have been made? Is N.A.T.O. strong or is it weak? What is the position? It is no use the right hon. Gentleman attending functions at the Guildhall, and similar functions, and making optimistic and glowing statements about the strength of N.A.T.O. when in fact he is not prepared to substantiate them.

Mr. Sandys: I remember that when the right hon. Gentleman was Minister of Defence I tried to get very similar information from him and quite unsuccessfully.

Mr. Bevan: In view of the fact that we are told in this House about the strength of our Armed Forces and are also told that the strength of N.A.T.O. is supposed to be part of the strength of Great Britain, how can we know what the strength of our own country is if we do not know what the strength of N.A.T.O. is?

Mr. Sandys: It is the right hon. Gentleman who does not know.

Mr. Bevan: With all respect to that schoolboyish reply, perhaps now we can have a serious answer. Is it not a fact that we have been told that the defence of this country and the defences of any of the N.A.T.O. countries are interdependent, one upon the other? If each one knows what its own defensive strength is but is not told the defence strength of the others, how can we assume that our own defence is strong?

Mr. Sandys: I do not think that we have ourselves published the precise information asked for by the right hon. Gentleman?

Mr. Shinwell: The Estimates?

Mr. Sandys: The Army is easy, but what the right hon. Gentleman asks for


is the strength of the West German forces available to the North Atlantic Treaty Organisation. That is not an easy sum in actual fact to make out. Some forces are actually assigned and others are assigned in time of war. It is not a straightforward piece of arithmetic.

Mr. Bevan: The right hon. Gentleman does not know.

Mr. Sandys: I could give the right hon. Gentleman a very long explanation of the position but I could not give him one figure, because that is not possible.

Mr. Paget: What are the secrecy rules? Who are the people who are allowed to give this information? General Norstad and various people give us detailed information. The Bundestag is given this information. Of course, there have to be things on the secret list, but since all these people come over from N.A.T.O. to lecture us about these matters, why cannot the House of Commons be told?

Mr. Sandys: I think I have already answered that supplementary question

Mr. Shinwell: Is the right hon. Gentleman aware that from time to time in this House we are asked in Committee to provide Supply for the forces contributed to N.A.T.O.? In view of that, cannot we have some information as to the numbers and strength? Is he aware that when I was Minister of Defence I was asked about N.A.T.O. and I stated in this House that we intended to provide four divisions in addition to the fact that we were preparing twelve territorial divisions at that time? Why should not the right hon. Gentleman give the information when undoubtedly the figures are different?

Mr. Sandys: The right hon. Member does not ask about British forces, but the forces of everybody else. As to the British forces, it has been said over and over again what the Army position is. As to the Navy and the Air Force, it is more difficult because the Navy as a whole is available to N.A.T.O. in the event of war, but it is a little unrealistic to say that vessels at Singapore are really usefully available to N.A.T.O. Therefore, I should not like to give a figure in that kind of way.

ORDER OF THE DAY

WAYS AND MEANS

[13th May]

Resolution reported,

ESTATE DUTY: RETENTION OR ASSUMPTION OF BENEFITS ON GIFTS INTERVIVOS

That, for the purposes of any condition of the law relating to estate duty which requires the exclusion of any benefit to a person where a gift is made of property, a benefit which a person obtained by virtue of operations associated with the gift shall be treated as a benefit to him by contract or otherwise.

Resolution read a Second time.

Question, That this House doth agree with the Committee in the said Resolution, put forthwith, pursuant to Standing Order No. 86 (Ways and Means Motions and Resolutions), and agreed to.

Instruction to the Committee on the Finance Bill that they have power to make provision therein pursuant to the said Resolution.

FINANCE BILL

Considered in Committee[Progress, 13th Mar].

[Sir CHARLES MACANDREW in the Chair]

The Chairman: I have placed a list of the Amendments which have been selected in the Lobby as I thought it would be convenient to hon. Members to know what Amendments will be called.

Mr. Harold Wilson: Does the list include new Clauses as well as the Amendments, Sir Charles?

The Chairman: Yes, they are all in the No Lobby.

Mr. Wilson: I am sure that that will be very convenient. It is another of the useful reforms introduced for this year's Committee stage, but I understand that some hon. Members may have views to communicate to you on this subject, while recognising that the selection of new Clauses is entirely at your discretion.

The Chairman: Only 20 new Clauses will be called out of a total of 80, so I suppose that 60 hon. Members will be seeing me.

Schedules 4 and 5 agreed to.

Clause 18.—(PURCHASE AND SALE OF SECURITIES: APPLICATION OF SS. 19–21.)

3.34 p.m.

Mr. Eric Fletcher: I beg to move, in page 16, line 17, to leave out from "months" to the end of the subsection.
As the Committee will appreciate, this is the first of a group of Clauses dealing with tax avoidance. It is a group of rather highly technical Clauses designed to remove some of the existing devices by which the Revenue is deprived of revenue which it otherwise would receive. This is not the first occasion on which we have had to discuss tax avoidance measures on the Finance Bill. In fact, it has become common form in almost every Finance Bill to have a group of Clauses designed to remove one ingenious device after another for avoiding tax.
As the Financial Secretary pointed out on Second Reading, this group of Clauses, 18 to 21, is designed to stop certain kinds of transaction colloquially called "bond washing". Bond washing is the name given to a device whereby an individual or a company buys securities cum-dividend and subsequently sells them ex-dividend, thereby making an apparent loss, and collects the dividend on which in the ordinary way tax is deducted.
As the Financial Secretary and the Committee are aware, there are certain groups of taxpayers who are able to benefit, illicitly as we think, from that kind of transaction. They are corporations which benefit either because they can set off the apparent loss against some other profits, or add them to some other loss, or in some cases, like charities, they are bodies which can ignore the apparent loss, because although they have collected a dividend which has paid tax, they can recover the tax which would be deducted at the hands of other taxpayers.
It has been common ground on both sides of the House that bond washing is something which should be stopped. Two or three years ago, when the present Prime Minister was Chancellor of the Exchequer, he gave assurances that measures introduced at that time were designed to stop it. They are like the categorical assurance given in 1955

by the present Minister of Housing and Local Government, then Financial Secretary to the Treasury, that a Clause in that year's autumn Finance Bill was designed to exterminate the small tribe of dividend strippers.
I shall preface what I want to say about the particular scope of the Amendment by saying that some of us on these benches, if not all of us, are getting heartily sick and tired of having to spend a great deal of time year after year on complicated Clauses designed to stop up one loophole after another. We believe that the time has come when the Committee should not be troubled with this kind of proceeding. There are at least three ways which I believe would be more effective. First, there is the method adopted in certain parts of the Commonwealth, notably Australia, where there is an overall Act of Parliament—rather similar to the Section in the Excess Profits Act—the effect of which is to provide that any contract or arrangement devised to defeat the operation of the Income Tax Acts or Finance Acts is absolutely void as against the Commissioners of Inland Revenue, but valid between the parties.
That, probably, is the most drastic and powerful way, but there are two other methods. There is the remedy suggested by my right hon. Friend the Member for Huyton (Mr. H. Wilson) a year or so ago whereby, if an appropriate Act were passed, the Chancellor of the day would be able, by Statutory Instrument, to close a particular loophole as soon as it was detected instead of having to wait ten, eleven or twelve months until the next Finance Bill. Parliament could well arrange for a Statutory Instrument, to be confirmed in the next Finance Bill, to operate in the same way as the Provisional Collection of Taxes Act has operated since Mr. Gibson Bowles was responsible for its introduction in 1913.
The third method, which I favour, is the method of enabling the Chancellor to give a clear warning that if future devices of this kind are practised, they will be stopped retrospectively in the next Finance Bill. It is all right for the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) to pretend to be horrified, but that is a precedent hallowed by a great many


previous Conservative Chancellors of the Exchequer, including the late Mr. Neville Chamberlain, the late Sir John Simon and the late Sir Kingsley Wood. In fact, that had become the classic way to deal with this kind of matter until the lamentable failure of the present Chancellor of the Exchequer in his last Budget to follow this method, and his quite deliberate abandonment of that powerful weapon in the armoury of the Treasury.
The great merit of retrospective legislation after a clear, emphatic and explicit warning is that it acts as a very powerful deterrent. The mere knowledge that it was no use trying to invent ingenious devices, because they could be stopped retrospectively, deterred people from trying new tax dodges. That principle, which had been built up over a number of years, was abandoned last year. The result is that we now have the Financial Secretary proposing these Clauses to deal with an admitted evil. I interrupted his Second Reading speech, after he had been explaining these Clauses, to ask whether he could give an assurance that the Clauses dealing with bond washing and dividend stripping would finally check bond washing.
I asked him whether he expected that next year further Clauses would be required to stop up further loopholes. The Financial Secretary, in all honesty, was unable to give me that assurance. He said:
I certainly would not say that ways may not be found round this or any conceivable legislation."—[OFFICIAL REPORT, 28th April, 1959; Vol. 604, c. 1119.]
We are now trying to stop up a few limited loopholes with the clear knowledge, admitted by the Government, that the Clauses will be inadequate and that further ways will undoubtedly be found round them and that next year and in subsequent years, unless we adopt one of the three alternatives which I have indicated, we shall have to have another series of similar complicated Clauses. This is a most unsatisfactory cat-and-mouse way of dealing with the situation. All we can do, by this Amendment, is to try to strengthen the Clause, which we believe to be quite inadequate in its present form. Previous experience has shown that these provisions are inadequate to deal with the evil which they are attempting to cure.
On the face of it, the Clause is open to objection and seems almost to invite these people who delight in devising methods of tax avoidance to try to devise other similar related methods which are just outside the scope of the Clause. That is why we have put down the Amendment. As the Clause stands, the only bond-washing operations which are stopped are those where the purchase and the sale take place within a month. If the Amendment were adopted, bond-washing operations would be stopped if the purchase and the sale took place within six months.
The Financial Secretary did not attempt to justify the Government proposal. He made quite clear what was the object of framing the Clause in this way. He pointed out that Clause 18 defines the whole field of review which governs the separate classes and cases referred to in Clauses 19, 20 and 21. He said that the revision would apply automatically if the time which elapsed between the purchase cum-dividend and the sale ex-dividend did not exceed a month.
3.45 p.m.
Then there is this very curious provision in paragraph (b) which we want to eliminate. As the Bill stands, bond-washing operations which take place within a six months' period are not caught at all where the purchase and sale are effected at current market prices. It is part of the normal device that ordinary bond-washing operations take place at the ordinary market price, but the companies and individuals who benefit from those operations benefit equally whether the period which elapses is one month, six weeks, two months, or any longer period. There is no magic in the period of one month.

Mr. Denzil Freeth: There is a certain magic in the sense that if a security is bought and sold on the Stock Exchange within 28 days, the broker need charge only one commission, and, therefore, there is a certain magic in the period of one month.

Mr. Fletcher: I am much obliged to the hon. Member. That is an indirect advantage, but it does not touch the point that persons and companies against whom these Clauses are directed can equally get a tax benefit if they buy


cum-dividend and sell ex-dividend, say, six or seven weeks later, because they make a loss which is a camouflaged or artificial loss in respect of which they get back a tax advantage. They still get the dividend, but instead of paying the tax on the dividend, like every other taxpayer, they can recover the tax.
Therefore, people who buy and sell within six or seven weeks may have to pay a marginal amount more, but they still benefit. They are still bond-washing operators whether they come into Clause 19, Clause 20 or 21. They are in pari materia, and although there might be some marginal difference about the benefit which they derive, they derive a benefit from a bond washing operation.
The object of the Amendment is to catch all bond washers who operate in this way, and we define bond washers as those who buy and sell within six months. It is noteworthy that this was the interpretation which the Economist, when first commenting on the Clause, gave to it in its publication of 25th April. After explaining the Chancellor's intentions about bond washing, the Economist said:
All in all the intention of the clauses appears no more than a reasonable attempt to protect the Revenue from a growing loss—the more so as they do not apply if the resale takes place more than six months after the date of the original purchase.
We would be quite content if that were the fact. The Economist thought that it was and thought that all bond-washing operations which took place so that the different operations occurred within six months were caught, but a careful review of the Clause manifests that that is not so.
If the Financial Secretary is truly concerned, as he ought to be, to make the Clause as watertight as possible, the Amendment ought to be accepted. Surely we are not to be told that, having abandoned last year what was a very powerful weapon in the armoury of the Treasury and which was a very useful deterrent for stopping tax avoidance after clear and explicit warnings, the Chancellor will be content to have this sort of thing going on year after year.
Surely we are not to be told that the Treasury will abandon these powers even further. But apparently that is so and apparently it is done deliberately, because, in a passage of the most dire

defeatism, the Financial Secretary said that next year further Clauses would be wanted to stop further devices. I have no doubt whatever that manipulators on the Stock Exchange and those who delight in discovering ways round tax avoidance Clauses will already have found certain devices.
It is clear that the present Clause is not watertight, because the Chancellor himself has tabled an Amendment which we shall come to later. The Chancellor's Amendment does not go so far as the Amendment of my right hon. and hon. Friends and myself, but it is one indication that if it were not for our Amendments, which in part the Chancellor has accepted, a glaring loophole would have been immediately apparent in the Bill.
Obviously, there are other loopholes, but this is by far the most serious one. Unless all bond washing within a six months' period is stopped the device which we are now condemning will continue. It may not continue on so extensive a scale, but it may continue on a scale so serious as to cause not only considerable loss to the Revenue, but considerable and growing irritation and annoyance to all other classes of taxpayers.

The Financial Secretary to the Treasury (Mr. J. E. S. Simon): The hon. Member for Islington, East (Mr. E. Fletcher) started by dealing generally with tax avoidance. Perhaps I can say—I hope that I shall be keeping within the rules of order—a word or two about what he said by way of introduction. It is tiresome for the House of Commons to have to stop up loopholes, but the hon. Gentleman suggested three ways of avoiding it which are of very doubtful efficacy. The first is that which was adopted under the Excess Profits Tax code, which I do not think finds support now in any part of the Committee. In giving it even the limited approbation which the hon. Gentleman did, he was not speaking for his side of the Committee.

Mr. E. Fletcher: Mr. E. Fletcher indicated assent.

Mr. Simon: I see that the hon. Gentleman himself is not particularly enamoured of it.
The second is a method of warning, plus retrospective legislation. I know


that the hon. Gentleman himself, supported by the hon. Member for Gloucester (Mr. Diamond), is still an adherent of that method. From what the right hon. Member for Huyton (Mr. H. Wilson) said, I do not believe that it commends itself to him, nor do I believe that it commends itself to the bulk of Committee. The method which, if I understood him aright, commends itself to the right hon. Member for Huyton—in that respect he is speaking for the overwhelming mass of his party—is the method of Statutory Instrument.

Mr. H. Wilson: Yes. The hon. and learned Gentleman is right in saying that my right hon. and hon. Friends and I very much prefer the proposal which I made for a Statutory Instrument or an affirmative Resolution of the House of Commons. That does not mean that in all circumstances we would rule out the possibility of retrospective legislation, any more than the Chancellor would. The Chancellor was quite specific in saying that he does not rule it out. It was merely that he ran away from it last year. He does not rule it out altogether.
If we could introduce legislation on the basis I proposed last year, it would be more acceptable, even on the other side of the Committee, than the idea of retrospective legislation. But if, for any reason, that cannot be done, or if it were to be limited in its effect, in cases such as we were debating a year ago we would feel justified, as the Chancellor felt justified in his Budget speech in 1958, in proposing retropsective legislation.

Mr. Simon: I think that I represented the right hon. Gentleman's position fairly, although he has expanded it somewhat. It would be fair to say that, in general, both sides of the Committee reject the method of retrospective legislation, even though there might be some cases where it would be appropriate.
Even if the third method of the affirmative Resolution were adopted, it does not mean that the Committee does not have to deal periodically and successively with methods of avoidance which Parliament thinks ought to be stopped for the protection of the Revenue and other taxpayers. Therefore, there is no question of being sick of stopping up

loopholes. The alternative method proposed by the right hon. Member for Huyton and mentioned by the hon. Member for Islington, East is merely a way of anticipating by a matter of months what, on our present procedure, Parliament does in a Finance Bill.
My right hon. Friend adverted to the matter, shortly at any rate, in reply to an interpolation in his speech on the Finance Bill. The objection is that one is buying a matter of months at a cost of a very considerable invasion of the established Parliamentary procedure in the imposition of direct taxation. I leave the matter there, merely pointing out that unless one accepts the sort of provision there was under the Excess Profits Tax code, there is no method of saving Parliament from stopping up loopholes which may disclose themselves in the general system of taxation which we think right to impose.

Mr. Douglas Jay: Will the hon. and learned Gentleman explain why the use of Statutory Instruments for this purpose should be any more of an invasion of Parliamentary procedure than the alteration of Purchase Tax by the same method?

Mr. Simon: I expressly mentioned direct taxation because, in general, very much larger sums may be involved for the individual taxpayer. That is by no means a matter to be dismissed so lightly. If one is to deal with these extremely complicated matters in a way which does not admit of any Amendment, as a Statutory Instrument does not admit of any Amendment, it seems to me that there is a profound difference between direct and indirect taxation. One has only to consider the number of Amendments tabled to these sort of Clauses from both sides of the Committee to see the difference between direct and indirect taxation.

Mr. Jay: Is the Financial Secretary really saying that this distinction rests on the amount of revenue involved?

Mr. Simon: No. I mentioned that as one of the matters. The other is the complication of taxation and the desirability, above all, of vouchsafing and preserving to Parliament its right to amend the fiscal code, which is never more necessary than in these sort of complicated fiscal provisions


Having said that, may I pass to the Amendment?

Mr. J. T. Price: Before the hon. and learned Gentleman passes from that, perhaps he would deal with this point. In considering this matter, which, admittedly is a most difficult one, has the hon. and learned Gentleman given due weight of consideration to the distinction which exists already in the fiscal law between debts due to the Treasury and civil debts in other matters between citizens? I remind the hon. and learned Gentleman of something of which I am sure he is fully aware. The Limitation Act, limiting the recovery of civil debts to six years if the debtor chooses to plead the Act, applies already to all debts except debts to the Treasury. The Treasury is in a position to go back ten years, fifteen years or twenty years if the facts warrant such a course, whereas if it were a civil transaction that would not be possible. In that sense the Treasury has a retrospective right to recover debts which could not be recovered by a private citizen.

Mr. Simon: That seems to me to be very doubtfully relevant to what we have under discussion, nor is it accurate. This is not the occasion to go into it, but the right of retrospective recovery on either side, by the Crown against the taxpayer and by the taxpayer against the Crown, is limited under statute.

4.0 p.m.

Mr. H. Wilson: Surely, what is relevant and accurate is the fact that the hon. and learned Gentleman and his party in this present Session have voted in favour of retrospective legislation affecting the constituencies of my hon. Friend the Member for Widnes (Mr. MacColl) and my hon. and learned Friend the Member for Kettering (Mr. Mitchison) and my constituency in respect of town and country planning legislation.
The Measure for which they voted said that a certain thing shall be the case and shall be deemed always to have been the case. In fact, the local authorities concerned had a claim against the Crown. Although the hon. and learned Gentleman and his party have voted for legislation to say that something shall

be deemed always to have been the case, the hon. and learned Gentleman is squeamish about having that same formula in respect of measures which are clearly and deliberately undertaken for the purpose of defrauding the Crown after long and repeated warnings from Her Majesty's Ministers.

Mr. Simon: The right hon. Gentleman has the advantage of me in the examples which he has mentioned, for I have not got them in mind and am not in a position to controvert him. Perhaps I might reply in the words of Browning, when asked about the meaning of "Sordello." I may have known at the time what I was voting for, but I cannot, after this lapse of time, recollect what it was.
It is perhaps sufficient to say that the right hon. Gentleman is right in saying that there are many examples of retrospective legislation which we would all accept, not least those which are in favour of the subject. But I think it fair to say that the House of Commons and the country at large have always been extremely jealous of retrospective penal legislation, and I would include in that the penal provisions of the fiscal code.
After that exordium, which was rather longer than I intended, I was about to deal with the Amendment. What we are seeking to do here is to preclude what I believe all hon. Members in the Committee believe to he an unjustifiable gain by individual taxpayers at the expense of the Exchequer—in other words, the general body of taxpayers—by the device of bond washing. We all believe that the fiscal profit which is being made is not one which is conscionable. On the other hand, we are all anxious to ensure that we do not interfere with the normal operations of the gilt-edged market.
It is extremely important that any Government should preserve a free market for dealing in its own bonds. Therefore, we have to balance, on one side, these necessary provisions to protect the Revenue and, on the other hand, the freedom of the market. Any provisions of this sort, any anti-avoidance measures, amount to some extent to an invasion of the freedom of the market. We have to accept some impairment of that freedom, but, all the same, let us be quite certain that we limit it to what is absolutely necessary.
In the first place, on ordinary transactions by dealing concerns one can rely on the swings and the roundabouts. An ordinary dealing concern will be buying ex-dividend, selling cum-dividend, and doing the opposite because it has to take up all the stock and securities that are offered to it in the ordinary way of business. So what the Revenue loses on the swings it picks up on the roundabouts.
Secondly, if securities are bought in the normal course of investment, it is a fact that the purchaser's circumstances may make it necessary for him to realise his investment after, say, two or three months. That does not imply any avoidance motive at all. In fact, in the avoidance cases that we have come across so far, the interval between the purchase cum-dividend and the sale ex-dividend the period has been only a few days; and we are advised that the period of one month, therefore, gives a substantial margin and a substantial safeguard.
There are two reasons why the operator who tries to carry out a transaction outside the one-month period is likely to run into trouble. The first is that the market may very easily turn against him, and the second is that, so far as we have been able to ascertain, these operators work on borrowed money, and therefore, the longer they hold the stock the greater the interest they have to pay, and the more that diminishes the dividend which constitutes the profit.
In these circumstances we feel that the one month period is sufficient. But we have provided ourselves with a long-stop in subsection (2, a)—the period of six months, where the purchase and sale were effected at something other than the current market price, which would be prima facie a sign of collusion or—this is the second half of the limb—where there is otherwise shown to be a collusive arrangement.
If the Amendment were accepted by the Committee, the effect on legitimate business would be a serious one, and, indeed, a damaging one for the normal operation of the market. It would mean that an institution which had money available for the time being in a bona fide investment would then feel unable to invest it in any stock on which the dividend date was approaching, because it could not feel certain of leaving the investment undisturbed for at least six months.

Mr. G. R. Mitchison: Does the inclusion of the six months' period, the long-stop period, mean that where there is what the hon. and learned Gentleman called a collusive arrangement it will, nevertheless, not attract the provisions of these Clauses if it is for a longer period than six months?

Mr. Simon: Yes, that is so. If it is for a period of over six months, the hon. and learned Gentleman will appreciate that another dividend will have become due. We are concerned with a single dividend becoming due, with the result that one gets a price change through the security going ex-dividend.

Mr. Mitchison: Are there not some companies which pay only one dividend a year?

Mr. Simon: That may be so, but, in practice, bond washing takes place in gilt-edged securities.
The point I was making was that perfectly legitimate institutions having money available for investment in gilt-edged securities would not be able to invest normally in any security which was approaching its dividend date because it could not feel certain of leaving the security undisturbed for at least six months. Indeed, if it were forced before the end of the six months' period to realise this security, it would be faced with the liability under Clause 19 or Clause 20 in the case of an exempt institution.
Therefore, I am advised that it would involve the periodical withdrawal of support from the gilt-edged market as the dividend period approached on a scale which would very seriously affect the stability and efficiency of the market. In a word, we believe that this falls well on the side of interfering with legitimate trading and is unnecessary for the purpose which we all have in mind, which is to stop bond washing in gilt-edged securities. Therefore, I advise the Committee to reject the Amendment.

Mr. John Diamond: Am I following the hon. and learned Gentleman's argument correctly? Is he saying that the practice of tax dodging by stripping gilt-edged securities is so widely established that, notwithstanding the enormous amount of Government securities which are available on the


market at any time, the withdrawal of the tax dodging facilities will seriously affect the price of gilt-edged securities?

Mr. Simon: No, the hon. Gentleman has got the precise opposite of the point that I was making. What we are afraid of is the withdrawal from the market of legitimate traders, investors and institutions, because if we extended this period to six months they would be liable to be caught if they realised their investments within six months; for they would be buying before the security went ex-dividend and might be forced to sell within six months. They would then come precisely within the mischief of this Amendment. That is the point. This is more than is necessary to deal with the bond washers; it would hit the legitimate investors and would, therefore. interfere with the normal operation of the market.

Mr. Gordon Walker: We are not satisfied with the reply and we are not satisfied with the Clause as it stands unamended. We are, in the words of my hon. Friend the Member for Islington, East (Mr. E. Fletcher), sick of stopping up gaps in this way. After all, this is not the first time that we have dealt with this problem. A vigorous effort was made in the 1957 Finance Act to deal with this sort of thing—the other way up, but it was intended to deal with this sort of thing. The Stock Exchange Council made special arrangements in 1957 to do it.
Ways were found round all of those methods, and that is why we now have this legislation. I am perfectly certain that these clever gentry have already found ways round this legislation. We know from long experience that this is always what happens. Every two or three years we get new anti-avoidance legislation with regard to dividend stripping and bond washing. If this is the way it is done, tax avoidance will continue. Indeed, after the careful scrutiny and care which must have been given to this matter before the Finance Bill was produced, we now have a number of other Government Amendments already on the Notice Paper to stop up further loopholes which had not been thought of before the Bill was published, but which have been thought of now.
The hon. and learned Gentleman himself was quoted by my hon. Friend. On 28th April, he said:
I certainly would not say that ways may not be found round this or any conceivable legislation."—[OFFICIAL REPORT, 28th April, 1959; Vol. 604, c. 1119.]
The important point is this. He has no assurance that ways will not be found round this legislation. That is why our basic point is that this is the wrong method of doing it, and that the right way is to have powers to deal with it by Statutory Instrument embodied in legislation.
4.15 p.m.
This deals with both the points which the hon. and learned Gentleman made. First, it is not just a question of a few months. Real speed and certainty of speed is the way of stopping this sort of trickery and dodging. If these ingenious gentlemen know that directly the thing is discovered it can be stopped, it will deter a great many of them from doing this sort of thing. As to the hon. and learned Gentleman's point about amendment, it does not apply if this is embodied in legislation within a given period—say, within six or twelve months—because the legislation can be amended. Members can put down any Amendments.
The hon. and learned Gentleman's objections to this Amendment do not apply, whereas our point is that the Government will go on chasing the tails of these people and never catching up with them. If they can have two years or eighteen months in which to get round this sort of thing, they can make their profits and then they are ready to make their new illicit profits in the next eighteen months. This will always, in effect, make tax avoidance possible and will continually complicate the law. The effect of our Amendment is to catch any transaction of buying cum and selling ex within six months.
We are still far from convinced that it would be wrong to remove this subsection, as it only affects transactions within one month. We think this brings the whole matter very near the margin of safety. When the hon. and learned Gentleman himself was defending this provision on the Second Reading of the Bill he said:
We believe that"—


that is, the period of one month—
to be sufficient to deal with the ordinary type of case which we have in mind …".—[OFFICIAL REPORT, 28th April, 1959; Vol. 604, c. 1117.]
But, of course, it is not the ordinary type of case about which we are worried. It is the extraordinary and ingenious type of man whom we are worried about. We are sure that the Bill would deal with the ordinary type of case, but it is the extraordinary type of case with which we want to deal.
When we come to the Clause itself, the hon. and learned Gentlemen called it a long-stop, but it really is hedging around this concession of one month with enormous precautions, because it is a dangerous thing to do. We would not always have to put in all these provisions about satisfying the Commissioners that the transaction was bona fide and not rigged, if it were not a dangerous thing to do. The very wording of this subsection which we want removed shows what a dangerous thing

it is to do. It puts a really onerous burden on the Commissioners. The very wording of the subsection suggests that dangers of avoidance will be created; otherwise, we would not need all these discretionary and special provisos to be written in.

Therefore, on general grounds, we have little confidence in this whole method of dealing with the matter, and on particular grounds we would have no confidence at all in this Clause unless our Amendment were accepted. We do not think this is the proper way of doing it, and even if the hon. and learned Gentleman intends to adhere to his way of doing it he ought to do it properly. It could be done properly only if our Amendment were adopted. We therefore feel that we must divide the Committee on this very important matter.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 242, Noes 196.

Division No. 124.]
AYES
[4.18 p.m.


Agnew, Sir Peter
Corfield, F. V.
Gurden, Harold


Allan, R. A. (Paddington, S.)
Craddock, Beresford (Spelthorne)
Hall, John (Wycombe)


Alport, C. J. M.
Crosthwaite-Eyre, Col. O. E.
Harris, Frederic (Croydon, N.W.)


Arbuthnot, John
Crowder, Sir John (Finchley)
Harris, Reader (Heston)


Armstrong, C. W.
Cunningham, Knox
Harrison, A. B. C. (Maldon)


Atkins, H. E.
Currie, G. B. H.
Harvey, Sir Arthur Vere (Macclesf'd)


Baldwin, Sir Archer
Davidson, Viscountess
Hay, John


Balniel, Lord
Davies, Rt. Hn. Clement (Montgomery)
Heald, Rt. Hon. Sir Lionel


Barber, Anthony
D'Avigdor-Goldsmid, Sir Henry
Heath, Rt. Hon. E. R. G.


Barlow, Sir John
Deedes, W. F.
Henderson-Stewart, Sir James


Barter, John
Donaldson, Cmdr, C. E. McA.
Hicks-Beach, Maj. W. W.


Batsford, Brian
du Cann, E. D. L.
Hill, Rt. Hon. Charles (Luton)


Baxter, Sir Beverley
Duncan, Sir James
Hill, John (S. Norfolk)


Beamish, Col. Tufton
Duthie, W. S.
Hinchingbrooke, Viscount


Beg, Ronald (Bucks, S.)
Eden, J. B. (Bournemouth, West)
Hirst, Geoffrey


Bennett, F. M. (Torquay)
Elliott, R.W. (Ne'castle upon Tyne, N.)
Hobson, John(Warwick &amp; Leam'gt'n)


Bennett, Dr. Reginald
Emmet, Hon. Mrs. Evelyn
Holland-Martin, C. J.


Bevins, J. R. (Toxteth)
Errington, Sir Eric
Holt, A. F.


Bidgood, J. C.
Erroll, F. J.
Hornby, R. P.


Biggs-Davison, J. A.
Fell, A.
Hornsby-Smith, Miss M. P.


Bingham, H. M.
Finlay, Graeme
Howard, Gerald (Cambridgeshire)


Birth, Rt. Hon. Nigel
Fisher, Nigel
Howard, John (Test)


Bishop, F. P.
Fletcher-Cooke, C.
Hughes Hallett, Vice-Admiral J.


Body, R. F.
Fraser, Hon. Hugh (Stone)
Hutchison Michael Clark (E'b'gh, S.)


Bonham Carter, Mark
Freeth, Denzil
Hutchison, Sir James (Scotstoun)


Bossom, Sir Alfred
Gammans, Lady
Hylton-Foster, Rt. Hon. Sir Harry


Bowen, E. R. (Cardigan)
Garner-Evans, E. H.
Iremonger, T. L.


Boyd-Carpenter, Rt. Hon. J. A.
George, J. C. (Pollok)
Irvine, Bryant Godman (Rye)


Braine, B. R.
Gibson-Watt, D.
Jenkins, Robert (Dulwich)


Brewis, John
Glover, D.
Jennings, J. C. (Burton)


Brooman-White, R. C.
Glyn, Col. Richard H.
Jennings, Sir Roland (Hallam)


Browne, J. Nixon (Craigton)
Godber, J. B.
Johnson, Dr. Donald (Carlisle)


Bryan, P.
Goodhart, Philip
Johnson, Eric (Blackley)


Bullus, Wing Commander E. E.
Gough, C. F. H.
Jones, Rt. Hon. Aubrey (Hall Green)


Burden, F. F. A.
Gower, H. R.
Joseph, Sir Keith


Butcher, Sir Herbert
Graham, Sir Fergus
Kerr, Sir Hamilton


Campbell, Sir David
Grant, Rt. Hon. W. (Woodside)
Kershaw, J. A.


Cary, Sir Robert
Grant-Ferris, Wg Cdr. R. (Nantwich)
Kirk, P. M.


Channon, H. P. G.
Green, A.
Lambton, Viscount


Chichester-Clark, R.
Gresham Cooke, R.
Lancaster, Col. C. G.


Cole, Norman
Grimond, J.
Leavey, J. A.


Conant, Maj. Sir Roger
Grimston, Hon. John (St. Albans)
Leburn, W. G.


Cooper-Key, E. M.
Grimston, Sir Robert (Westbury)
Legge-Bourke, Maj. E. A. H.


Cordeaux, Lt.-Col. J. K.
Grosvenor, Lt.-Col. R. G.
Legh, Hon. Peter (Petersfield)




Lindsay, Hon. James (Devon, N.)
Noble, Michael (Argyll)
Speir, R. M.


Lindsay, Martin (Solihull)
Nugent, Richard
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)


Linstead, Sir H. N.
Oakshott, H. D.
Stanley, Capt. Hon. Richard


Lloyd, Maj. Sir Guy (Renfrew, E.)
O'Neill, Hn. Phelim (Co. Antrim, N.)
Stevens, Geoffrey


Longden, Gilbert
Orr-Ewing C. Ian (Hendon, N.)
Steward, Harold (Stockport, S.)


Loveys, Walter H.
Osborne, C.
Steward, Sir William (Woolwich, W.)


Lucas, Sir Jocelyn (Portsmouth, S.)
Page, R. G.
Stoddart-Scott, Col. Sir Malcolm


Lucas-Tooth, Sir Hugh
Pannell, N. A. (Kirkdale)
Storey, S.


Macdonald, Sir Peter
Partridge, E.
Stuart, Rt. Hn. James (Moray)


Mackeson, Brig. Sir Harry
Peel, W. J.
Summers, Sir Spencer


McLaughlin, Mrs. P.
Peyton, J. W. W.
Taylor, William (Bradford, N.)


Maclean, Sir Fitzroy (Lancaster)
Pike, Miss Mervyn
Temple, John M.


McLean, Neil (Inverness)
Pilkington, Capt. R. A,
Thompson, Kenneth (Walton)


Macleod, Rt. Hn. Iain (Enfield, W.)
Pitman, I. J.
Thornton-Kemsley, Sir Colin


MacLeod, John (Ross &amp; Cromarty)
Pitt, Miss E. M.
Tiley, A. (Bradford, W.)


McMaster, Stanley
Pott, H. P.
Tilney, John (Wavertree)


Macmillan, Maurice (Halifax)
Powell, J. Enoch
Turton, Rt. Hon. R. H.


Macpherson, Niall (Dumfries)
Price, David (Eastleigh)
Tweedsmuir, Lady


Maddan, Martin
Price, Henry (Lewisham, W.)
Vane, W. M. F.


Maitland, Hon. Patrick (Lanark)
Prior-Palmer, Brig. O. L.
Vickers, Miss Joan


Markham, Major Sir Frank
Profumo, J. D.



Marlowe, A. A. H.
Ramsden, J. E.
Wade, D. W.


Marples, Rt. Hon. A. E.
Redmayne, M.
Wakefield, Edward (Derbyshire, W.)


Mathew, R.
Rees-Davies, W. R.
Wakefield, Sir Wavell (St. M'lebone)


Mawby, R. L.
Remnant, Hon. P.
Walker-Smith, Rt. Hon. Derek


Maydon, Lt.-Comdr, S. L. C.
Renton, D. L. M.
Wall, Patrick


Medllcott, Sir Frank
Ridsdale, J. E.
Ward, Rt. Hon. G. R. (Worcester)


Milligan, Rt. Hon. W. R.
Rippon, A. G. F.
Ward, Dame Irene (Tynemouth)


Molson, Rt. Hon. Hugh
Robertson, Sir David
Webbe, Sir H.


Morrison, John (Salisbury)
Rodgers, John (Sevenoaks)
Webster, David


Mott-Radclyffe, Sir Charles
Roper, Sir Harold
Williams, Paul (Sunderland, S.)


Nabarro, G. D. N.
Russell, R. S.
Williams, R. Dudley (Exeter)


Nairn, D. L. S.
Scott-Miller, Cmdr. R.
Wills, Sir Gerald (Bridgwater)


Neave, Airey
Sharples, R. C.
Wolrige-Gordon, Patrick


Nicholls, Harmar
Shepherd, William
Woollam, John Victor


Nicholson, Sir Godfrey (Farnham)
Simon, J. E. S. (Middlesbrough, W.)



Nicolson, N. (B'n'm'th, E. &amp; Chr'ch)
Smithers, Peter (Winchester)
TELLERS FOR THE AYES:


Noble, Comdr, Rt. Hon. Allan
Spearman, Sir Alexander
Colonel J. H. Harrison and




Mr. Hughes-Young.




NOES


Abse, Leo
Diamond, John
Jenkins, Roy (Stetchford)


Ainsley, J. W.
Dodds, N. N.
Jones, Rt. Hon. A. Creech(Wakefield)


Albu A. H.
Ede, Rt. Hon. J. C.
Jones, Elwyn (W. Ham, S.)


Allaun, Frank (Salford, E.)
Edelman, M.
Jones, J. Idwal (Wrexham)


Allen, Schofield (Crewe)
Edwards, Rt. Hon. Ness (Caerphilly)
Jones, T. W. (Merioneth)


Awbery, S. S.
Edwards, Robert (Bilston)
Kenyon, C.


Bacon, Miss Alice
Edwards, W. J. (Stepney)
Key, Rt. Hon. C. W.


Baird, J.
Evans, Albert (Islington, S.W.)
King, Dr. H. M.


Balfour, A.
Fletcher, Eric
Lawson, G. M.


Bellenger, Rt. Hon. F. J.
Foot, D. M.
Lee, Frederick (Newton)


Bence, C. R. (Dunbartonshire, E.)
Forman, J. C.
Lee, Miss Jennle (Cannock)


Benson, Sir George
Fraser, Thomas (Hamilton)
Lindgren, G. S.


Beswick, Frank
Gaitskell, Rt. Hon. H. T. N.
Lipton, Marcus


Bevan, Rt. Hon. A. (Ebbw Vale)
Gibson, C. W.
Logan, D. G.


Blenkinsop, A.
Gordon Walker, Rt. Hon. P. C.
Mabon, Dr. J. Dickson


Blyton, W. R.
Greenwood, Anthony
McAlister, Mrs. Mary


Boardman, H.
Grenfell, Rt. Hon. D. R.
McCann, J.


Bowden, H. W. (Leicester, S.W.)
Grey, C. F.
MacColl, J. E.


Bowles, F. G.
Griffiths, David (Rother Valley)
MacDermot, Niall


Boyd, T. C.
Griffiths, Rt. Hon. James (Llanelly)
McInnes, J.


Braddock, Mrs. Elizabeth
Griffiths, William (Exchange)
McLeavy, Frank


Brockway, A. F.
Hale, Leslie
MacMillan, M. K. (Western Isles)


Broughton, Dr. A. D. D.
Hall, Rt. Hn. Glenvil (Colne Valley)
MacPherson, Malcolm (Stirling)


Brown, Thomas (Ince)
Hamilton, W. W.
Mahon, Simon


Burke, W. A.
Hannan, W.
Mallalieu, E. L. (Brigg)


Burton, Miss F. E.
Hastings, S.
Mallalieu, J. P. W. (Huddersfd, E.)


Butler, Herbert (Hackney, C.)
Hayman, F. H.
Mann, Mrs. Jean


Butler, Mrs. Joyce (Wood Green)
Healey, Denis
Mayhew, C. P.


Callaghan, L. J.
Henderson, Rt. Hn. A. (Rwly Regis)
Mellish, R. J.


Carmichael, J.
Herbison, Miss M.
Mitchison, G. R.


Champion, A. J.
Hilton, A. V.
Moody, A. S.


Chapman, W. D.
Hobson, C. R. (Keighley)
Morris, Percy (Swansea, W.)


Chetwynd, G. R.
Holman, P.
Morrison, Rt. Hn. Herbert (Lewis'm, S.)


Clunie, J.
Holmes, Horace
Mort, D. L.


Coldrick, W.
Houghton, Douglas
Moss, R.


Collick, P. H. (Birkenhead)
Hoy, J. H.
Moyle, A.


Cronin, J. D.
Hughes, Cledwyn (Anglesey)
Mulley, F. W.


Cullen, Mrs. A.
Hughes, Emrys (S. Ayrshire)
Neal, Harold (Bolsover)


Darling, George (Hillsborough)
Hunter, A. E.
Noel-Baker, Francis (Swindon)


Davies, Ernest (Enfield, E.)
Hynd, H. (Accrington)
Oliver, G. H.


Davies, Harold (Leek)
Hynd, J. B. (Attercliffe)
Oram, A. E.


Davies, Stephen (Merthyr)
Irving, Sydney (Dartford)
Oswald, T.


Deer, G.
Jay, Rt. Hon. D. P. T.
Owen, W. J.


Delargy, H. J.
Jeger, George (Goole)
Paget, R. T.







Paling, Rt. Hn. W. (Dearne Valley)
Short, E. W.
Thornton, E.


Paling, Will T. (Dewsbury)
Simmons, C. J. (Brierley Hill)
Timmons, J.


Pannell, Charles (Leeds, W.)
Skeffington, A. M.
Tomney, F.


Parker, J.
Slater, Mrs. H. (Stoke, N.)
Usborne, H. C.


Parkin, B. T.
Slater, J. (Sedgefield)
Viant, S. P.


Paton, John
Smith, Ellis (Stoke, S.)
Warbey, W. N.


Pearson, A.
Sorensen, R. W.
Watkins, T. E.


Popplewell, E.
Sparks, J. A.
Wheeldon, W. E.


Prentice, R. E.
Spriggs, Leslie
White, Mrs. Eirene (E. Flint)


Price, J. T. (Westhoughton)
Steele, T.
Wilkins, W. A.


Price, Philips (Gloucestershire, W.)




Probert, A. R.
Stewart, Michael (Fulham)
Willey, Frederick


Proctor, W. T.
Stonehouse, John
Williams, David (Neath)


Rankin, John
Stones, W. (Consett)
Williams, Rt. Hon. T. (Don Valley)


Redhead, E. C.
Straohey, Rt. Hon. J.
Williams, W. R.(Openshaw)


Reeves, J.
Strauss, Rt. Hn. George (Vauxhall)
Willis, Eustace (Edinburgh, E.)


Reid, William
Stross, Dr. Barnett (Stoke-on-Trent, C)
Wilson, Rt. Hon. Harold (Huyton)


Reynolds, G. W.
Summerskill, Rt. Hon. E.
Woof, R. E.


Rhodes, H.
Swingier, S. T.
Yates, V. (Ladywood)


Robens, Rt. Hon. A.
Sylvester, G. O.
Zilliacus, K.


Roberts, Albert (Nomanton)
Taylor, Bernard (Mansfield)



Ross, William
Thomas, lorwerth (Rhondda, W.)
TELLERS FOR THE NOES:


Shinwell, Rt. Hon. E.
Thomson, George (Dundee, E.)
Mr. John Taylor and Mr. Rogers.

Amendment made: In page 17, line 8, leave out "to have" and insert "as having".—[The Solicitor-General.]

Mr. Geoffrey Stevens: I beg to move, in page 17, lire 27, at the end to insert:
but does not extend to the securities issued by a company which is not resident in the United Kingdom or in the Republic of Ireland or to securities issued by the national or local governments in any country outside the United Kingdom or the Republic of Ireland".
Clauses 19 to 21, as we heard earlier from the hon. Member for Islington, East (Mr. E. Fletcher), are designed to catch bond washers on a wide scale, and Clause 18 defines the persons and transactions which are to be caught in the net. I wonder very much whether Clause 18 as drawn goes too far. I think that the Government have had second thoughts in that direction also, because they have put down an Amendment to Clause 19 which will exclude, among others, discount houses from the operation of Clauses 19 to 21.
It is the fact, of course, that when some people overdo it, legislation has to be introduced, but then the innocent are likely to be caught in the same net as the guilty. Despite the Government Amendment to Clause 19, I still feel that Clause 18 goes too wide. I have in mind here not persons, but property. Clause 18 (6, c) defines the securities as including stocks and shares. I wonder whether there is an anomaly here in that, if those are stocks and shares of a company resident overseas and not itself liable to United Kingdom Income Tax at the standard rate, the dividends being received net at a rate of tax less than the United Kingdom standard rate, the

Clause as drawn may not deal with this situation in a proper manner.
It seems to me in general terms inappropriate to bring in overseas income which becomes chargeable to tax only because the recipient is liable to United Kingdom Income Tax because of residence here. It seems to me that there is a second anomaly there. My Amendment seeks to put that anomaly right without destroying the purpose either of Clause 18 or the three following Clauses.

4.30 p.m.

Mr. Simon: At present, securities are construed under the Clause as including stocks and shares, and that includes securities dealt with abroad. As I understand, my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) wants to exclude securities issued by companies or institutions which are not resident in the United Kingdom.
As the Committee knows, a certain amount of dealing in securities is carried out in the way of arbitrage. What happens is that where a discrepancy in price of a security which is dealt with in more than one national exchange comes about, so that in one exchange it is standing above what it is standing at in another exchange, there are dealers who carry out arbitrage operations designed to buy in the market where the security is cheaper and to sell in the market where it is dearer, thus making a profit, and, I suppose, economically speaking, carrying out the function of providing an overall market and bringing the prices into adjustment.
That is perfectly legitimate business, but it can take place in such a way as to involve bond washing. It may be


perfectly legitimate, in which case it is let out by the provisions which we have written into these Clauses, particularly Clause 18, which are designed to prevent legitimate business from being penalised. On the other hand, it may be a perfectly ordinary case of bond washing such as those at which we are trying to strike.
In other words, not only does one get the ordinary arbitrage profit that one gets by buying in the market where the stock stands lower and selling in the international market where it stands higher, but, if it takes place at a period when the dividend is declared, one can get the artificial loss that ranks in the case of a dealing concern as an income loss and, therefore, supports a claim against the Inland Revenue.
There is nothing in the provisions which we are asking Parliament to enact which interferes in any way with the arbitrage business. The ordinary arbitrage profit can still be made. All we say is that if a bond washing operation is involved in addition, then the fortuitous profit arising from the bond washing operation must be discounted—I use a neutral term to cover the three following Clauses—for tax purposes. In other words, we would stop bond washing in a domestic market, but would still leave an avenue open for it in the international market. It is because my hon. Friend's Amendment would expose that gap that I cannot advise the Committee to accept the Amendment.

Mr. Douglas Houghton: I think that the Financial Secretary's explanation is quite convincing. I do not think that the hon. Member for Portsmouth, Langstone (Mr. Stevens) made his point to the satisfaction of the Committee. He doubted whether the Clause went too far. Generally in these matters we wonder whether the Clauses go far enough. In a Clause which tries to stop further bond washing transactions the hon. Member seems anxious to let up in some way.
What the Clauses are trying to do is to stop avoidance of United Kingdom Income Tax on transactions of a kind referred to in the Clause. It does not seem to matter what kind of stocks and shares they are—whether they belong to a company resident outside this

country or not—if transactions in those stocks and shares can result in the avoidance of United Kingdom Income Tax. The Financial Secretary has explained that nothing legitimate is being stopped by these provisions, but what the hon. Member's Amendment might do would be to admit in this sphere of operation transactions which in United Kingdom companies would be caught by these Clauses. That would seem to be anomalous. We on this side are satisfied that the hon. Gentleman's Amendment should be rejected.

Mr. Stevens: I am happy to find myself in agreement with the hon. Member for Sowerby (Mr. Houghton), although I regret to say that the circumstances in which I do so are different. I confess that my practical knowledge of bond washing is nil, but it has seemed to me from discussions which I have had in recent years that bond washing normally takes place in British securities rather than in overseas securities. I would have thought that the number of operators of the type that we want to get at and who operate in foreign securities is very small, but I may be wrong.
I associate myself with the hon. Member for Sowerby in paying tribute to the clear manner in which my hon. and learned Friend has advised the Committee to reject the Amendment and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Mitchison: I beg to move, in page 17, line 29, to leave out "against the same persons".
Would it be for the convenience of the Committee if we took with this Amendment those in page 17, line 30, to leave out "capital and", and to leave out from "interest" to "notwithstanding", in line 31? I do not know whether it would also be convenient to take the Amendment standing in the name of the Chancellor of the Exchequer, in line 34, at the end to add:
and for the purposes of this paragraph rights guaranteed by the Treasury shall be treated as rights against the Treasury.

The Temporary Chairman (Major Sir William Anstruther-Gray): That would be convenient for the Committee.

Mr. Mitchison: Clause 18 describes the scope of the operations which are


more particularly dealt with in the three following Clauses. They are, broadly speaking, in one form or another, the purchase of securities and their subsequent sale. Where the securities are the same, no question arises, but the Clause rightly provides for cases where the securities are not the same but are similar. In subsection (4) there is a reference to
a sale of securities similar to, and of the like nominal amount as, securities previously bought.
If the matter rested there, that would cover quite a lot of ground and it would strike at the root of the trouble where a man had bought securities of one kind and resold similar securities in such a way as to amount to bond washing. When one goes further into the Clause, however, one comes to the definition of what is similar. It is no ordinary definition. One has first to remember what one is dealing with. It is not merely British Government securities. It will include, for instance, the securities of local authorities in this country and by definition it includes stocks and shares, too. Therefore, it goes a long way into the various sectors of investment that are possible.
One has to consider the position, for instance, in the following Clause, of someone who is carrying on a trade which consists of dealing in securities and who will for that purpose, presumably, have a stock of securities carried from time to time and varying from time to time and who will purchase before the date of the declaration of the dividend or the payment of interest, as the case may be, and sell afterwards. Suppose that he buys, for instance, the stock of a county council which pays interest at a given rate on a given date and that he has in his pool stock of another county council which pays interest at the same rate and on the same date.
As I read the Clause, if that person sells the stock of the same council in a way that amounts to bond washing, he will get caught. If, however, instead of doing that, he sells the stock of the other county council, the effect on his affairs would be exactly the same, but he would not be caught. That can be extended for a very long way.
The reason why I come to this curious conclusion, although, at first sight, one

would say that it really cannot be so and that "similar" must extend to cases of that kind, is that when I look at the definition of "securities", I find that they are deemed to be similar if they entitle their holders to the same rights against the same persons and, therefore, the rights against county council A and the rights against county council B, though in substance, time and everything else exactly similar, would be against different people and the effect of the Clause would consequently differ according to whether, having bought the stock of one county council, a person resold it or resold a precisely similar stock instead of it. As the Clause is dealing with people who necessarily keep a pool of this sort, all that they have to do is to choose the right stock at the moment and they will thereby avoid paying a great deal of tax which, on ordinary definitions of the word "similar", one would suppose that they had to pay.
Then one comes to the question of rights. The first Amendment is directed to leaving out "against the same persons" and I have given the reason for it. Holders of securities have to have the same rights against the same persons as to capital and interest. I am not versed in the niceties of the Stock Exchange, but it seems to me perfectly conceivable that one might have two stocks which convey the same rights against the same persons as regards interest but which do not convey the same rights against those people as regards capital.
One might have, for instance, two sets of debenture stocks, one a first mortgage and the other a second mortgage, both paying interest at the same rate on the same date. If somebody bought the one debenture stock and happened to have the other in his bundle at the time and sold it out of the bundle instead of out of his recent purchase, he would be left in, if not exactly the same, at least a very similar position, and yet by so doing he would have avoided the effect or the intended effect of the Clause.
4.45 p.m.
What is the point of insisting that, for the purposes of the Clause, rights against people should be the same as to capital? It is a Clause concerned with interest rather than capital. Accordingly,


the second of the two Amendments would leave out the reference to rights in respect of capital.
The third Amendment, to line 30, is, perhaps, a little more difficult. Up to that point, paragraph (d) runs:
securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest".
What we propose to do is to stop at that point. By so doing, we would leave out the reference to remedies and we would leave out, too, a rather mysterious reference to
notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.
I understand that reference to relate purely to the remedies for enforcement. If I am wrong in so understanding it, I shall, no doubt, be corrected. If, however, I am right, all we are trying to do is to leave out the question of enforcement and remedies for enforcement.
Again, I cannot see the relevance of this. I should have thought that stock. were sufficiently similar for this purpose, at least when one had a payment of interest of the same amount at the same date, and that questions of remedies, which might well be complicated, ought not to be allowed to shield a person who was dealing in securities similar for the purposes of the Clause as I understand them.
The question of interest raises an aspect which, I agree, is perhaps not fully covered by our Amendment. It raises it, however, and it will be interesting to hear the Government's reply. It may be necessary later to make some addition to what we propose and what the Government will accept. The case I have in mind is as follows. Let us assume some completely identical stock—the same stock—and let us suppose that a person buys a given amount of it before the declaration of interest and sells afterwards the given amount less, say, 1s.
Obviously, that may be a bond-washing transaction and yet the Clause is worded in such a way that the securities have not only to be similar, but they also have to be of like nominal amount. When one comes to the definition of

"similarity", one finds that there has to be the same right as regards interest. I am not clear what "right" in that connection means. Does it include the right to receive a given amount of money as interest or is it some other form of right; and if so, what?
I wonder whether the Government will make clear what is being done to avoid the case of a person who, quite deliberately, makes a minimal change in the amount of the security that he sells after the interest date as against the amount of the security which he bought before the interest date? If the answer is this kind of thing, suppose that he buys £100,000 and sells £99,999. The Clause would attach to the £99,999. If that is the answer, then it is very difficult to reconcile the reference to the "nominal amounts" in the subsection.
If it is not the answer, what is the answer? If, as I suspect to be the case, there is no answer, is this not merely one other instance of the extreme difficulty of catching operations of this kind, when we feel we must not interfere with lawful transactions—and one appreciates the feeling—and when we are reluctant at the same time to provide for anything but statutory Clauses of this kind at the time of the Budget?
I have been thinking lately that it was about time that the Treasury had a coat of arms, and I am going to make a suggestion for that purpose. It would be one of those gushing taps, and the Treasury attempting to stop the leak: I am afraid, with rather insufficient plumbers. Hon. Members can have their own ideas as to what the supporters should be. The motto, I think, might be taken from Offenbach's song about the gendarme, who always, be it remembered, came on the scene singing "Toujours trop tard"—always too late.
Really, it is all very well, but these bond-washing transactions can and do, as we have been told, involve very large sums indeed, and it is most unsatisfactory that we should be able to deal with them only year by year at the time of the Budget, and that when we try to deal with them the language with which we are attempting to cope with the evil does seem to allow of the most obvious evasion, in the spirit, at any rate, and that the Government are being practically driven to say, "We cannot deal with


the bond washer without interfering with legitimate business."
I do not believe that that can be the case, but I do believe that if we are confined to dealing with the bond washer by annual legislation, and if the Government are very cautious about it, as they seem to be in this Clause about similar securities, all they do is make the man laugh, get out of it as easily as anything a month or two afterwards, and put into his own pocket a precious packet of money which ought to have paid tax during the ten or eleven months between those transactions and the next Budget.

Mr. Freeth: I am always amazed at the ingenuity with which lawyers are able to twist words, if not for their own advantage, in order to warn this Committee and other people.

Mr. Diamond: On a point of order. Is it in order for the hon. Gentleman to criticise his own Front Bench in this dastardly fashion?

The Temporary Chairman: I heard nothing out of order, just a general observation.

Mr. Freeth: If the hon. Member had not interrupted me, he would have found my sentence rounded off in a compliment to his hon. and learned Friend the Member for Kettering (Mr. Mitchison). Now I feel that I must move forward from that point.
I myself equally find difficulty in trying to construe the accurate and definite meanings, if such there be, of subsection (6, d) to which this group of Amendments refers. Indeed, I did write to my hon. and learned Friend the Financial Secretary to inquire of him how he understood certain of these definitions to read. I think that it was probably due to one of my letters that the Amendment standing in the name of my right hon. Friend the Chancellor, the Amendment to page 17, line 34, was put down, because "against the same persons", which the Amendment under discussion would omit, seems to me a rather important point.
I gather that my right hon. Friend's Amendment refers to the necessity for maintaining Three per cent. Electricity Stock, 1968–73, and Three per cent. Transport Stock, 1968–73, as being similar stocks, since otherwise it might be argued that the Electricity Council

and the British Transport Commission were different persons.
However, as I understand this paragraph, it would appear that each local authority is a separate person. Frankly, I do not believe that that will nullify the effectiveness of this Clause, because if one attempts to undertake bond washing by means of buying cum-dividend and selling ex-dividend, it is necessary to buy a fairly substantial amount of stock if the undertaking is to prove profitable. That means that one is virtually limited to dealing in British Government stock, or possibly the stocks of Commonwealth and Colonial Governments. It is almost impossible to think, and at the moment I cannot think, of a local authority stock or of two local authority stocks in which there is a sufficiently free market to enable this type of operation to be undertaken. While it naturally does not matter in dealing with the bond washer, I think it would limit still further the mark et in local government securities which it is necessary that the Government should help to maintain if local authorities are to be able to finance themselves reasonably from time to time.
Of course, the people who do hold one local government stock against another local government stock by becoming the bull of one stock against the bear sale of another stock are the jobbers on the London Stock Exchange or the dealers on other stock exchanges, and I notice that there is an Amendment to the next Clause in the name of my right hon. Friend specifically designed to exclude those people from the operation of these Clauses. These are the only people who would be operating by going bear on one local government stock in order to become bull on another local government stock, and I should have thought that as they were being excluded from the Bill this Amendment of the hon. and learned Gentleman was an unnecessary one.
As to debenture stocks, my hon. and learned Friend the Financial Secretary was kind enough to write to me that he understood that two debentures with the same dates of redemption, paying the same nominal rate of interest at the same interest dates, would be deemed similar if they were issued by the same company, even though separate registers


were kept of each of them and even if each had a separate sinking fund. I do agree that the hon. and learned Gentleman raised a point when he said that what he wanted to raise was the effect if they were secured on different assets belonging to the same company, but I should have thought that the words of this paragraph (d)
the same rights against the same persons
did cover as a major point the minor point of the particular assets belonging to the same person against which those particular debenture stocks were secured. I should have thought this an irrelevancy in any case, because it is no use attempting to bond wash if one has to pay Government Stamp Duty as well as broker's commission.
5.0 p.m.
If one attempts to buy and sell debenture stocks within a relatively short period of time, one not only has to pay a commission to the stockbroker which is nearly twice, and possibly much more than twice, the commission one has to pay in buying Government securities, but in addition one has to pay the Chancellor of the Exchequer 2 per cent. Stamp Duty; and this type of operation becomes totally uneconomic. One would get really serious about this particular type of operation in relation to debenture stocks only if one anticipated that the Chancellor of the Exchequer would remove the 2 per cent. Stamp Duty on the transfer of securities, of which I see no sign of his doing.

Mr. Mitchison: I notice that the definition includes stocks and shares on which Stamp Duty and commission would be at least as much as on debentures.

Mr. Freeth: Yes, but I cannot see the great difficulty here. We are talking about how we should define "similarity". In the case of ordinary preference stocks or shares, I should have thought it pretty simple, and the arguments which I have used about Stamp Duty and commission apply even more. In fact, bond washing takes place only with Government securities 999,999 times out of 1 million, but I think that my hon. and learned Friend would be doing us a service if he dealt with the question of the same nominal amount.
Not being a lawyer, I assume that if a person bought £100,000 nominal of a

security cum-dividend and sold £99,999 ex-dividend, he was buying and selling the same amount, namely, £99,999 nominal, and would be charged with bond washing on that £99,999. The hon. and learned Member for Kettering is an expert in this kind of legal unwinding, and unravelling, but I hope that my hon. and learned Friend the Financial Secretary will clear up for the benefit of the Committee this particular point. I should have thought that in view of the practicability of bond washing and in view of the need to get a clear and concise statement in the various Amendments on the Order Paper, only the Amendment in the name of my right hon. Friend should be accepted by the Committee.

Mr. Simon: My task is rendered easier on these Amendments because the problems which we have to face were posed with great clarity, as well as entertainingly, by the hon. and learned Member for Kettering (Mr. Mitchison) and answered with masterly authority by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth). I respectfully agree with the hon. and learned Member for Kettering when he says that this is an extremely difficult task. We are all agreed that what we have to do is to stop bond washing on the one hand but, on the other, not interfere with the legitimate operations of the gilt-edged market. Secondly, as far as the subsection and the Amendments are concerned, we want to prevent an operator from side-stepping the Bill's provisions by selling securities which are, for all practical purposes, fully equivalent to those he bought cum dividend but are distinguishable on some purely formal aspect only.
The hon. and learned Member gave a clear example. It would be ridiculous, obviously, if we let off a case where a dealer was already in possession of £100,000 conversion stock and then bought cum dividend shortly before the dividend date another £100,000 conversion stock and sold the original one which he held and claimed that this was not a bond-washing transaction. It is to stop that kind of transaction that we have Clause 18 (4) and subsection (6, d).
Other examples are the registered and bearer forms of the same sort, or bonds of the same issue but of different denominations. I should like to look


again at the question of debentures. I looked at it carefully when my hon. Friend the Member for Basingstoke was good enough to see me and to write to me about the subsection. I should like to pay tribute to him and to say that it is indeed true that the Amendment in page 17, line 34, at end add:
and for the purposes of this paragraph rights guaranteed by the Treasury shall be treated as rights against the Treasury
was due to his expert knowledge. I think and hope, however, that I can satisfy the Committee and the hon. and learned Member and my hon. Friend about the words
'… of the like nominal amount. …
The case put was that A buys £10,000 of bonds cum dividend and sells £9,999 of them ex dividend. I am advised, and I put this before the Committee with confidence, that that would be in any event caught by subsection (4), which says:
For the purposes of this and the three next following sections a sale of securities similar to, and of the like nominal amount as, securities previously bought … shall be equivalent to a sale of the original securities …
It seems to me that the courts could put no other construction on that than to say that when he bought £10,000 of bonds he bought the £9,999 that he subsequently sold plus one and, therefore, it is of the same nominal amount.
There is a further example. Suppose that he had three bearer bonds of £50 and then bought cum dividend a further bond of £150 and then sold the three of £50 ex dividend. I should have thought it perfectly clear that those would have been of the like nominal amount, and those words were put in the Bill precisely for that object. But if there was any doubt, I should have thought that it was resolved by the words in subsection (6, d), which states:
securities shall be deemed to be similar if they entitle their holders to the same rights … notwithstanding any difference in the total nominal amount. …
Therefore, if there were any doubt about the words "like nominal amount" they would be resolved by those words.

Sir Patrick Spens: Would my hon. and learned Friend consider substituting "a" for "the" in the

expression "the like nominal amount" so that it would read:
… securities similar to, and of a like nominal amount. …"?
The difficulty, if there is one, arises from the fact that "the" suggests that one has to buy and sell the same packet, but if one buys a large packet and sells something out of it, that must be caught by the Clause. I should have thought that the use of "a" would have made the Clause clearer.

Mr. Simon: I am much obliged to my right hon. and learned Friend. Obviously, any suggestion from him on a matter like this merits very serious consideration, and I gladly undertake to look into the construction before Report.

Mr. Mitchison: May I ask the Financial Secretary to go a little further? I cannot quite agree with the advice that has been given to him. It is, at any rate, doubtful. Surely, if what is intended is that, having bought a given amount of stock, in selling afterwards any part of that stock in the circumstances suggested one will then be caught by Clause 19, it is perfectly simple to say that, whereas, as it is, I doubt whether it is clear.

Mr. Simon: I doubt whether the hon. and learned Gentleman is right when he says that it is perfectly simple to say so, because our experience of this type of drafting is that it is extremely difficult to put in ordinary language what we intend. I believe, and I am advised, that that is what we have done. The hon. and learned Gentleman is quite right in saying what is our object, but I will, as I have said, look again into this matter of drafting.
The Amendments put forward go very much too far. In effect, they mean the complete abandonment of the principle of real equivalence. Any two securities would have to be treated as similar provided only that the respective rates of interest differed by not more than a marginal amount. That is going much too far. Quite unconnected transactions could be linked together as a common deal and caught by Clause 19. The effect would be that no one buying cum-dividend could sell anything at the same interest rate or even at a marginal difference of interest rate for six months. That would be a serious interference with the market and go far beyond what the hon. and learned Gentleman intends.

Mr. Mitchison: I am sorry to interrupt. There is no question of stopping anyone doing anything here. It is simply a question of what tax should be paid if they do it.

Mr. Simon: In fact, the hon. and learned Member would stop them. If we take the case of a perfectly reputable investor, say, a large pension fund, and we say that it can only buy cum-dividend at the risk that anything it sells ex-dividend within the next six months at approximately the same interest rate will attract tax, it is a very serious innovation. Exactly the same applies to the dealings concerned in the next Clause. We should, in effect, be preventing people from buying cum-dividend in the way that they would want to do in order to balance their funds against their actuarial responsibilities.
Secondly, as a result of that, every possible combination of purchase and sale would have to be tested to see whether the respective securities are similar, according to the enlarged definition Therefore, there can be no question of accepting this group of Amendments, because they go far beyond the test which the hon. and learned Gentleman himself posed. That is not to say that then is no problem here. There is the problem which was pointed out by my hon. Friend the Member for Basingstoke, which arises on the particular similarity of two nationalised industries' stocks. We are discussing the Amendment in page 17, line 34, with these Amendments, and it is really covered. The point in that case is that there are these two stocks, the Three per cent. Electricity Stock and the Three per cent. Transport Stock which are made on the same day and have the same coupon rights and also the same dividend rights and the same earliest and latest redemption dates, 1968–73.
There is a technical distinction that each is the liability of a different public board and, therefore, as the Clause is drafted, it would be possible to wash the bonds between them—to do a switch operation, if the Committee understands me. It is for that reason that we have put down the Amendment in page 17, line 34, because they are both subject to a Government guarantee. That Amendment, I am advised, will ensure their being treated as similar stocks and

prevent any bond washing switching between them. For those reasons, I would recommend the Committee to reject the series of Amendments of the hon. and learned Gentleman and to accept the Amendment which my right hon. Friend has put forward.

Mr. Mitchison: May I ask if in the case of either of the two guarantee stocks which the hon. and learned Gentleman has mentioned there is any right to appoint a receiver in any circumstances?

Mr. Simon: I cannot answer that one without notice. Perhaps there will be an opportunity at a later stage of discussing this matter, or I will try to let the hon. and learned Gentleman know.

Mr. Mitchison: The hon. and learned Gentleman will appreciate that if there were such a right in one case and not in the other his Amendment would not have the effect he desires.

5.15 p.m.

Mr. Houghton: Nothing that I say on these Amendments will deserve the compliment of masterly authority. I am not even a long-stop; I am a stop-gap. Like the Financial Secretary, I am speaking from a brief which has been put in my hands, but I have not had as long to study it as in his case.
Incidentally, on a minor matter of drafting, I am advised that in subsection (4), line 35, the word "subsection" should be "subsections", since every reference to the "foregoing subsection" refers to subsection (3), which merely states what disposing of stocks means. I leave that suggestion with the hon. and learned gentleman; it is not my own.
Another thing that I have been asked to say is that it is not bulls and bears that we are after but foxes. The extraordinary thing is that so far we have not found it possible to go too far in stopping bond washing. Nothing that we have done yet has set up a screen. All we have done up to now has been to give fresh opportunities for those whose ingenuity has so far frustrated the intentions of Parliament.
We believe that it is important to have a safeguard against bond washing in similar stocks. I think that we are agreed on that. Then we have to be satisfied that our definition of similarity is watertight. The hon. and learned


Gentleman says that our proposal is more than watertight; it really changes the basis of similarity. Quite frankly, we do not mind if it does, because for once in a way we would rather hear representations that we have gone too far than repeat the experience of realising that we have not gone far enough. The Financial Secretary says he is prepared to give further attention to any weaknesses on this matter that there are in Clause 18 as drafted, and in order that he shall not forget this we think we should ask our hon. and right hon. Friends on this side of the Committee to divide in favour of our Amendment. At least that is the point I have to come to before I sit down.
I see that our Amendments carry the definition of similarity to an extreme,

but then extreme measures have to be adopted here. We are probably fighting a losing battle anyway, because nothing that has gone before suggests that we have come out on top. Even if it does restrain some of the transactions in stocks and shares and activities of bond holders, are we really rendering any real service to the community or to the economy thereby? The time may come when these restraints are inevitable if we are to succeed in stopping tax avoidance.

That is my case, I am sticking to it, and I am asking my hon. and right hon. Friends to support me in the Lobby.

Question put, That "against the same persons" stand part of the Clause:—

The Committee divided: Ayes 251, Noes 209.

Division No. 125.]
AYES
[5.22 p.m.


Agnew, Sir Peter
Crosthwaite-Eyre, Col. O. E.
Henderson, John (Cathcart)


Aitken, W. T.
Crowder, Sir John (Finchley)
Henderson-Stewart, Sir James


Allan, R. A. (Paddington, S.)
Crowder, Petre (Rulsilp—Northwood)
Hicks-Beach, Maj. W. W.


Alport, C. J. M.
Cunningham, Knox
Hill, Rt. Hon. Charles (Luton)


Amory, Rt. Hn. Heathcoat (Tiverton)
Currie, G. B. H.
Hill, Mrs. E. (Wythenshawe)


Arbuthnot, John
Davidson, Viscountess
Hill, John (S. Norfolk)


Armstrong, C. W.
D'Avigdor-Goldsmid, Sir Henry
Hinchingbrooke, Viscount


Atkins, H. E.
Donaldson, Cmdr. C. E. McA.
Hirst, Geoffrey


Baldock, Lt.-Cmdr. J. M.
Doughty, C. J. A.
Hobson, John (Warwick &amp; Leam'gt'n)


Baldwin, Sir Archer
du Cann, E. D. L.
Holland-Martin, C. J.


Balniel, Lord
Duncan, Sir James
Holt, A. F.


Barber, Anthony
Duthie, W. S.
Hornby, R. P.


Barlow, Sir John
Eden, J. B. (Bournemouth, West)
Hornsby-Smith, Miss M. P.


Barter, John
Elliot, R. W.(N'castle upon Tyne, N.)
Horsbrugh, Rt. Hon. Dame Florence


Batsford, Brian
Emmet, Hon. Mrs. Evelyn
Howard, Gerald (Cambridgeshire)


Baxter, Sir Beverley
Errington, Sir Eric
Howard, John (Test)


Beamish, Col. Tufton
Erroll, F. J.
Hughes Hallett, Vice-Admiral J.


Bell, Ronald (Bucks, S.)
Fell, A.
Hughes-Young, M. H. C.


Bennett, F. M. (Torquay)
Finlay, Graeme
Hutchison, Michael Clark(E'b'gh, S.)


Bennett, Dr. Reginald
Fisher, Nigel
Hutchison, Sir James (Scotstoun)


Bevins, J. R. (Toxteth)
Fletcher-Cooke, C.
Hylton-Foster, Rt. Hon. Sir Harry


Bidgood, J. C.
Fraser, Hon. Hugh (Stone)
Iremonger, T. L.


Biggs-Davison, J. A.
Freeth, Denzil
Irvine, Bryant Godman (Rye)


Bingham, R. M.
Gammans, Lady
Jenkins, Robert (Dulwich)


Birch, Rt. Hon. Nigel
Garner-Evans, E. H.
Jennings, J. C. (Burton)


Bishop, F. P.
George, J. C. (Pollok)
Jennings, Sir Roland (Hallam)


Body, R. F.
Gibson-Watt, D.
Johnson, Dr. Donald (Carllsle)


Bonham Carter, Mark
Glover, D.
Johnson, Eric (Blackley)


Bossom, Sir Alfred
Glyn, Col. Richard H.
Jones, Rt. Hon. Aubrey (Hall Green)


Bowen, E. R. (Cardigan)
Godber, J. B.
Joseph, Sir Keith


Boyd-Carpenter, Rt. Hon. J. A.
Goodhart, Philip
Kerr, Sir Hamilton


Braine, B. R.
Gough, C. F. H.
Kershaw, J. A.


Braithwalte, Sir Albert (Harrow, W.)
Gower, H. R.
Kirk, P. M.


Brewis, John
Graham, Sir Fergus
Lambton, Viscount


Brooman-White, R. C.
Grant, Rt. Hon. W. (Woodside)
Lancaster, Col. C. G.


Browns, J. Nixon (Craigton)
Grant-Ferris, Wg Cdr. R. (Nantwich)
Leather, E. H. C.


Bullus, Wing Commander E. E.
Green, A.
Leavey, J. A.


Burden, F. F. A.
Gresham Cooke, R.
Leburn, W. G.


Butcher, Sir Herbert
Grimond, J.
Legge-Bourke, Maj. E. A. H.


Campbell, Sir David
Grimston, Hon. John (St. Albans)
Legh, Hon. Peter (Petersfield)


Carr, Robert
Grimston, Sir Robert (Westbury)
Lindsay, Hon. James (Devon, N.)



Grosvenor, Lt.-Col. R. G.
Lindsay, Martin (Solihull)


Cary, Sir Robert
Gurden, Harold
Linstead, Sir H. N.


Channon, H. P. G.
Hall, John (Wycombe)
Lloyd, Maj. Sir Guy (Renfrew, E.)


Chichester-Clark, R.
Harris, Frederic (Croydon, N.W.)
Longden, Gilbert


Clarke, Brig. Terence (Portsmth, W.)
Harris, Reader (Heston)
Loveys, Walter H.


Cols, Norman
Harrison, A. B. C. (Maldon)
Lucas, Sir Jocelyn (Portsmouth, S.)


Conant, Maj. Sir Roger
Harvey, Sir Arthur Vere (Macclesf'd)
Lucas-Tooth, Sir Hugh


Cooper-Key, E. M.
Harvey, John (Walthamstow, E.)
Macdonald, Sir Peter


Cordeaux, Lt.-Col. J. K.
Hay, John
Mackeson, Brig. Sir Harry


Corfield, F. V.
Heald, Rt. Hon. Sir Lionel
McLaughlin, Mrs. P.


Craddock, Beresford (Spelthorne)
Heath, Rt. Hon. E. R. G.
Maclean, Sir Fitzroy (Lancaster)




McLean, Neil (Inverness)
Peyton, J. W. W.
Steward, Sir William (Woolwich, W.)


Macleod, Rt. Hon. Iain (Enfield, W.)
Pike, Miss Mervyn
Stoddart-Scott, Col. Sir Malcolm


McMaster, Stanley
Pilkington, Capt. R. A.
Storey, S.


Macmillan, Maurice (Halifax)
Pitman, I. J.
Stuart, Rt. Hon. James (Moray)


Maddan, Martin
Pitt, Miss E. M.
Summers, Sir Spencer


Maitland, Hon. Patrick (Lanark)
Pott, H. P.
Taylor, Sir Charles (Eastbourne)


Markham, Major Sir Frank
Powell, J. Enoch
Taylor, William (Bradford, N.)


Marlowe, A. A. H.
Price, David (Eastleigh)
Temple, John M.


Marples, Rt. Hon. A. E.
Price, Henry (Lewisham, W.)
Thompson, Kenneth (Walton)


Mathew, R.
Prior-Palmer, Brig. O. L.
Thornton-Kemsley, Sir Colin


Mawby, R. L.
Profumo, J. D.
Tiley, A. (Bradford, W.)


Maydon, Lt-Comdr, S. L. C.
Ramsden, J. E.
Tilney, John (Wavertree)


Milligan, Rt. Hon. W. R.
Rawlinson, Peter
Turton, Rt. Hon. R. H.


Molson, Rt. Hon. Hugh
Redmayne, M.
Tweedsmuir, Lady


Morrison, John (Salisbury)
Rees-Davies, W. R.
Vane, W. M. F.


Mott-Radclyffe, Sir Charles
Remnant, Hon. P.
Vickers, Miss Joan


Nabarro, G. D. N.
Renton, D. L. M.
Wade, D. W.


Nairn, D. L. S.
Ridsdale, J. E.
Wakefield, Edward (Derbyshire, W.)


Neave, Airey
Robertson, Sir David
Wakefield, Sir Wavell (St. M'lebone)


Nicholls, Harmar
Rodgers, John (Sevenoaks)
Walker-Smith, Rt. Hon. Derek


Nicholson, Sir Godfrey (Farnham)
Roper, Sir Harold
Wall, Patrick


Nicolson, N. (B'n'm'th, E. &amp; Chr'ch)
Ropner, Col. Sir Leonard
Ward, Rt. Hon. G. R. (Worcester)


Noble, Comdr. Rt. Hon. Allan
Russell, R. S.
Ward, Dame Irene (Tynemouth)


Noble, Michael (Argyll)
Scott-Miller, Cmdr. R.
Webbe, Sir H.


Nugent, Richard
Sharpies, R. C.
Webster, David


Oakshott, H. D.
Simon, J. E. S. (Middlesbrough, W.)
Williams, Paul (Sunderland, S.)


O'Neill, Hn. Phelim (Co. Antrim, N.)
Smithers, Peter (Winchester)
Williams, R. Dudley (Exeter)


Orr-Ewing, C. Ian (Hendon, N.)
Spearman, Sir Alexander
Wills, Sir Gerald (Bridgwater)


Osborne, C.
Speir, R. M.
Wolrige-Gordon, Patrick


Page, R. G.
Spene, Rt. Hn. Sir P. (Kens'gt'n, S.)
Woollam, John Victor


Pannell, N. A. (Kirkdale)
Stanley, Capt. Hon. Richard



Partridge, E.
Stevens, Geoffrey
TELLERS FOR THE AYES:


Peel, W. J.
Steward, Harold (Stockport, S.)
Colonel J. H. Harrison and




Mr. Bryan.




NOES


Abse, Leo
Edelman, M.
Jones, J. Idwal (Wrexham)


Ainsley, J. W.
Edwards, Rt. Hon. Ness (Caerphilly)
Jones, T. W. (Merioneth)


Albu, A. H.
Edwards, Robert (Bilston)
Kenyon, C.


Allaun, Frank (Salford, E.)
Edwards, W. J. (Stepney)
Key, Rt. Hon. C. W.


Allen, Scholefield (Crewe)
Evans, Albert (Islington, S.W.)
King, Dr. H. M.


Awbery, S. S.
Finch, H. J. (Bedwellty)
Lawson, G. M.


Bacon, Miss Alice
Fitch, A. E. (Wigan)
Lee, Frederick (Newton)


Baird, J.
Fletcher, Eric
Lindgren, G. S.


Balfour, A.
Foot, D. M.
Lipton, Marcus


Bellenger, Rt. Hon. F. J.
Forman, J. C.
Logan, D. G.


Benoe, C. R. (Dunbartonshire, E.)
Fraser, Thomas (Hamilton)
Mabon, Dr. J. Dickson


Benson, Sir George
Gaitskell, Rt. Hon. H. T. N.
McAlister, Mrs. Mary


Beswick, Frank
George Lady Megan Lloyd (Car'then)
McCann, J.


Bevan, Rt. Hon. A. (Ebbw Vale)
Gibson, C. W.
MacColl, J. E.


Blenkinsop, A.
Gordon Walker, Rt. Hon. P. C.
MacDermot, Niall


Blyton, W. R.
Greenwood, Anthony
McInnes, J.


Boardman, H.
Grenfell, Rt. Hon. D. R.
McKay, John (Wallsend)


Bowden, H. W. (Leicester, S.W)
Grey, C. F.
McLeavy, Frank


Bowles, F. G.
Griffiths, David (Rother Valley)
MacMillan, M. K. (Western Isles)


Boyd, T. C.
Griffiths, Rt. Hon. James (Llanelly)
MacPherson, Malcolm (Stirling)


Braddock, Mrs. Elizabeth
Griffiths, William (Exchange)
Mahon, Simon


Brockway, A. F.
Hale, Leslie
Mallalieu, E. L. (Brigg)


Broughton, Dr. A. D. D.
Hall, Rt. Hon. Glenvil (Colne Valley)
Mallalieu, J. P. W. (Huddersfd, E.)


Brown, Thomas (Ince)
Hamilton, W. W.
Mann, Mrs. Jean


Burke, W. A.
Hannan, W.
Mayhew, C. P.


Burton, Miss F. E.
Hastings, S.
Mellish, R. J.


Butler, Herbert (Hackney, C.)
Hayman, F. H.
Mitchison, G. R.


Butler, Mrs. Joyce (Wood Green)
Healey, Denis
Moody, A. S.


Callaghan, L. J.
Henderson, Rt. Hn. A. (Rwly Regis)
Morris, Percy (Swansea, W.)


Carmichael, J.
Herbison, Miss M.
Morrison, Rt. Hn. Herbert (Lewis'm, S.)


Champion, A. J.
Hilton, A. V.
Mort, D. L.


Chapman, W. D.
Hobson, C. R. (Keighley)
Moss, R.


Chetwynd, G. R.
Holman, P.
Moyle, A.


Clunie, J.
Holmes, Horace
Mulley, F. W.


Coldrick, W.
Houghton, Douglas
Neal, Harold (Bolsover)


Collick, P. H. (Birkenhead)
Hoy, J. H.
Noel-Baker, Francis (Swindon)


Corbet, Mrs. Freda
Hughes, Cledwyn (Anglesey)
Noel-Baker, Rt. Hon. P. (Derby, S.)


Cronin, J. D.
Hughes, Emrys (S. Ayrshire)
Oliver, G. H.


Cullen, Mrs. A.
Hunter, A. E.
Oram, A. E.


Darling, George (Hillsborough)
Hynd, H. (Accrington)
Oswald, T.


Davies, Ernest (Enfield, E.)
Hynd, J. B. (Attercliffe)
Owen, W. J.


Davies, Harold (Leek)
Irvine, A. J. (Edge Hill)
Paling, Rt. Hon. W. (Dearne Valley)


Davies, Stephen (Merthyr)
Irving, Sydney (Dartford)
Paling, Will T. (Dewsbury)


Deer, G.
Isaacs, Rt. Hon. G. A.
Palmer, A. M. F.


Delargy, H. J.
Jay, Rt. Hon. D. P. T.
Pannell, Charles (Leeds, W.)


Diamond, John
Jeger, George (Goole)
Parker, J.


Dodds, N. N.
Jenkins, Roy (Stechford)
Parkin, B. T.


Donnelly, D. L.
Jones, Rt. Hon. A. Creech (Wakefield)
Paton, John


Ede, Rt. Hon. J. C.
Jones, Elwyn (W. Ham, S.)
Pearson, A.







Popplewell, E.
Slater, J. (Sedgefield)
Viant, S. P.


Prentice, R. E.
Smith, Ellis (Stoke, S.)
Warbey, W. N.


Price, J. T. (Westhoughton)
Sorensen, R. W.
Watkins, T. E.


Price, Philips (Gloucestershire, W.)
Soskice, Rt. Hon. Sir Frank
Weitzman, D.


Probert, A. R.
Sparks, J. A.
Wheeldon, W. E.


Proctor, W. T.
Spriggs, Leslie
White, Mrs. Eirene (E. Flint)


Pursey, Cmdr. H.
Steele, T.
White, Henry (Derbyshire, N.E.)


Rankin, John
Stewart, Michael (Fulham)
Wilkins, W. A.


Redhead, E. C.
Stones, W. (Consett)
Willey, Frederick


Reeves, J.
Strachey, Rt. Hon. J.
Williams, David (Neath)


Reid, William
Strauss, Rt. Hon. George (Vauxhall)
Williams, Rev, Llywelyn (Ab'tillery)


Reynolds, C. W.
Stross, Dr. Barnett (Stoke-on-Trent, C.)
Williams, Rt. Hon. T. (Don Valley)


Rhodes, H.
Summerskill, Rt. Hon. E.
Williams, W. R. (Openshaw)


Robens, Rt. Hon. A.
Swingler, S. T.
Willis, Eustace (Edinburgh, E.)


Roberts, Albert (Normanton)
Sylvester, G. O.
Wilson, Rt. Hon. Harold (Huyton)


Ross, William
Taylor, Bernard (Mansfield)
Woof, R. E.


Shinwell, Rt. Hon. E.
Thomas, Iorwerth (Rhondda, W.)
Yates, V. (Ladywood)


Short, E. W.
Thomson, George (Dundee, E.)
Zilliacus, K.


Silverman, Julius (Aston)
Timmons, J.



Simmons, C. J. (Brierley Hill)
Tomney, F.
TELLERS FOR THE NOES:


Skeffington, A. M.
Ungoed-Thomas, Sir Lynn
Mr. John Taylor and Mr. Rogers.


Slater, Mrs. H. (Stoke, N.)
Usborne, H. C.

Amendment made: In page 17, line 34, at end add:
and for the purposes of this paragraph rights guaranteed by the Treasury shall be treated as rights against the Treasury."—[Mr. Simon.]

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

5.30 p.m.

Mr. Diamond: It will have been noted by all who have listened to this debate that nowhere in this Clause have the words "bond washing" been inserted. Those words have been used from time to time by the hon. and learned Gentleman the Financial Secretary, but this, apparently, is his method of explaining to us what the Clause is about. In fact, bond washing was first of all dealt with in Section 203 of the 1952 Income Tax Act where the main kind of bond washing is described. That Section is headed "Sale and repurchase of securities", and it makes it quite clear that it is dealing with a situation where one person sells to another and where the interest is receivable otherwise than by the owner. That is what bond washing is about.
Under Clause 18, and the following two or three Clauses, we are dealing with a situation which is totally different from bond washing—in fact, precisely the opposite. Fairly enough the draftsmen have been perfectly straightforward and clear and have described the Clause as dealing with the "Purchase and sale of securities", which is the very opposite to the sale and repurchase of securities by which the bond washing Sections in the previous Act are described. Moreover, Clause 18 makes it clear that we are now dealing with transactions under which the interest is receivable by the

other person in the transaction, which was not the case in bond washing.
In short, although the Financial Secretary has been talking to us about bond washing, both in his opening remarks on the Second Reading of the Finance Bill and during the course of this afternoon's discussion, I suggest to him that he has been misleading the Committee. I want to inquire for a second or two why he has been misleading the Committee. There is no question about how the transaction is described by the draftsmen, but let us turn for a second to the common sense English of the Clause.
A bond-washing transaction is obviously one where a person has a bond which has a dirty interest which he wants to wash. He wants to wash the bond clean of interest, so he retains the bond by artificial methods and washes it clean of the interest. Dividend stripping, on the other hand, a phrase which might provoke certain reactions on the Front Bench opposite and which the Committee was tired to death of discussing a year ago and before that, is precisely the opposite transaction where, in commonsense parlance, a person has a bond, wants the dividend, strips the dividend, retains the dividend and gets rid of the bond. Bond washing, therefore, is a transaction in which a person keeps the bond and gets rid of the dirty dividend, and dividend stripping is a transaction where a person strips and keeps the dividend and gets rid of the bond. These two things are precisely opposite, and for that reason are described in opposite ways and dealt with by precisely opposite methods in the drafting of these respective Clauses.
I am wondering why it was necessary for an inaccurate phrase to be used—it


does not matter a great deal; no one is going to deny that there is some relationship between bond washing and dividend stripping—and why it was necessary for us to be diverted from the reconsideration of precisely the same matter that we were considering on precisely the same Clause on precisely the same stage in the debate last year on the 1958 Finance Bill.
Of course, it is unpleasant for Government spokesmen, having made all the declaration which they did a year ago, first that dividend stripping was fully protected against and then having brought in some further Amendments in the latter stage of the Bill and said that it was finally and fully protected against, to have to come forward with a Bill which devotes three or four Clauses to dealing with a development of the same problem of dividend stripping, which is merely one of the old-established methods of tax dodging. That is very unpleasant, and it is even more unpleasant when someone opposite gets up and says, "I told you so." That is something which is unforgiveable, and I will not attempt to do so. But I will, if I may, quote to the Solicitor-General the words of Humpty-Dumpty, I believe it was, who said:
I told them once, I told them twice,
They would not listen to advice.
I said it very loud and clear,
I went and shouted in his ear.
The Solicitor was very stiff and proud,
He said 'You needn't shout so loud'.'
In fact, what the hon. and learned Gentleman said last year was that the hon. Member for Gloucester had made his usual speech. Which is to be preferred, that the hon. Member for Gloucester should make his usual speech accusing the Government of not being really intent to stop tax dodging or that the Financial Secretary should make his usual speech year after year explaining why the Government have to bring in a new Clause filling in a further loophole in the previous year's Finance Act, and so ad infinitum? I should have thought that it was far preferable to get down to the problem of tax dodging and face up to it. The reason why I am boring the Committee with this distinction between bond washing and dividend stripping is that, to my mind, it is significant of the fact that the Government are still not prepared to face up

to the problem fully. We know that last year the Chancellor ran away from retrospection. We know that because, of course, he brought it in at one stage and then decided, on further consideration, that he had made an unwise statement.
That was, as we on this side have said many times, most unfortunate. We put it as nicely as we can by saying that it is far worse to have loved righteousness and to have run away from retrospection than never to have loved at all—if I may, as a much-married man, suggest that to a bachelor. The serious side is that the one thing that stops tax dodging is the making it not worth while, and it is not worth while if one has not the certainty that one can carry the transaction through to its conclusion and obtain the artificial tax benefit. The possibility of retrospection, even if it never takes place, is, at all events, a very considerable curb on taking action of the kind dealt with in Clause 18.
A further reason that I have for putting this point of view is that I cannot understand why it has taken so long to bring this Clause to the attention of the Committee. I must now be very careful what I say, but I have here a document, which I understood to have been passed to the Front Bench opposite last July, dealing with stripping gilts—and, let us be frank about it, this Clause does deal with the old pre-war problem of stripping gilts.
I understood that this memorandum was to be passed to the Treasury Bench. It may not have been received, but that is what I understood. It certainly circulated amongst several of us on this side. That memorandum drew attention not only to this old pre-war tax-dodging device of stripping gilts but suggested for it the precise remedy that has been adopted in this and the following Clauses. It would be interesting to know, therefore, whether the Government received it; if they received it, what they did about it, and why it was necessary to take all this time to give effect to the recommendations made in that document.
The difficulty we are up against on this side is in knowing whether the Government really do want to stop all this or whether they are so anxious not to tread on anyone's corns in any way


at all that they must allow each year a number of persons to enter into wholly artificial transactions and get tax benefit at the expense of the rest of the community. Why should certain members of the community pay more than their fair share of tax so that others can pay less? That is a simple question.
A further point—it is, in effect, a further question—is this. Subsection (6) of the original Section which dealt with bond washing deals with the powers of the Inland Revenue to get information. In short, it was thought necessary when the bond-washing provisions were introduced that the Commissioners of Inland Revenue should be given powers to get such further information as they considered necessary for "discovering" the situation.
There is nothing in any of these subsections or in the Schedule that goes with them that gives those same powers. Why have t he Government thought it unnecessary to arm, by this Clause, the Inland Revenue with the same powers as those with which it was armed by the 1952 Act? I am driven to the conclusion that there is no real intention to stop this evil. The evil arises out of the practice of the courts of regarding an artificial transaction as a real transaction. Provided that it is supported by documents which give enforceable rights, an artificial transaction is construed by the courts as a real transaction, giving rise to these benefits, although, behind it all, it was a purely artificial transaction all the time.
5.45 p.m.
I do not suppose that the hon. and learned Gentleman would support an arrangement by which the courts were given power to decide on the substance of a transaction as opposed to its artificial appearance. If he is not prepared to support an arrangement like that, we must surely have some arrangement by which the tax-paying public can be protected.
I do not think that the tax-paying public can be protected by anything short of the introduction of provisions such as these in Clause 18, and subsequent provisions, the mischief aimed at quite clearly described, and the authoritative spokesman of the Government of the day—the Chancellor, or whoever it may be—says, "These are our clear

intentions, and if we are not successful, if loopholes are found, we shall bring in legislation to stop up those loopholes so as to carry out the intentions of Parliament as they are today". I cannot see why that should be regarded as being in any way reprehensible, or why it should be regarded as penal to ask people to pay the taxes that Parliament has said they should pay but which they are merely putting on to their less fortunate neighbours to pay.
I must bring in a further example to show how the philosophy behind Clause 18 is supported by another action of the Government. I shall refer to it very shortly indeed. There was a short debate on the National Film Finance Corporation, from which it emerged that the Board of Trade had to be pressed very hard indeed before it would undertake not to sell a trading loss, which would go against the Revenue. I say no more. I realise that it is not a matter for discussion now.
It is, however, relevant to point the case, both under the provisions of this Clause and from what has gone before in dealing with previous Sections 18. It is, incidentally, very much easier for a practitioner to know that by the time we come to Section or Clause 18 we are dealing with dividend stripping or something like that. This Clause is introduced this year, a similar Clause was introduced last year, and, no doubt, a similar Clause will be introduced again next year, to deal with a mischief that arises only because the Government are not really determined to deal with it fully.

Sir Henry d'Avigdor-Goldsmid: The hon. Member for Gloucester (Mr. Diamond) will not, I am sure, expect me to follow him altogether into the difference between dividend stripping and bond washing. I am reminded, however, that the late Professor Einstein, who regarded himself as an intelligent man, said he thought that he could understand almost anything except popular explanations of the Einstein Theory. We all know the transaction at which the Clause is aimed, and some of our difficulty in defining it is probably because of the length of the Clause and, I would say, to some of the not altogether relevant arguments introduced in discussing it.
Bond washing is a bad description for a transaction that is self-condemnatory, but I am surprised that the hon. Gentleman should suggest that this Government have really made no attempt to deal with it. He said that the first Act that dealt with it was the Finance Act, 1952. He also referred to the "pre-war practice of stripping gilts", but when the Government which he supported were in power from 1945 to 1951 they did not deal with the pre-war practice of stripping gilts.
It is perfectly clear that, during those years, the profits to those who practised this activity were very much greater, because the level of the standard rate of taxation was higher. There was, therefore, a larger margin for practitioners. If the position were as odious and disquieting as he indicates, it is a little surprising that at the time when it was worse it escaped his own Government's attention.
Having said that, I think that it is perfectly clear that in dealing with this very intricate matter, the danger that is run all the time is, if the Committee will allow me, the danger of throwing the baby out with the bath water. The bath water in this case is the loss to the Revenue. The baby is the benefit to the country of having a financial centre unrivalled in the world. We have to measure these two things against each other. Many entirely legitimate institutions in the City have grumbled that they are not benefiting from the exemption being granted to stock jobbers and to discount houses, but the general consensus of opinion which I have been able to obtain is that these transactions, which are themselves undesirable must, in the national interest, be dealt with so as to be controlled in the most limited number of cases. In view of this particularly difficult position, I feel that the Clause is an honest attempt to deal with what must be a progressive and continuous difficulty.
The suggestion which we have heard more than once that these matters should be the subject of regulations must be the greatest possible deterrent to anybody not domiciled in this country from leaving his money here. We benefit from the amount of foreign money which comes here. When "hot" money comes here it tends to cool off

and to be diverted to the uses of this country, and hon. Members on both sides of the Committee should regret action which would tend to discourage foreign money from coming here.
I can think of no greater discouragement than to cast any doubt on the tax position of what are, in fact, banking deposits, where security is the main consideration and where a bank deposit might unwittingly lay itself open, in following a Government regulation, to taxation which would entirely remove any interest earned. I suggest for that reason that this slow process of dealing with it Budget by Budget and Clause 18 by Clause 18 is probably the best way of dealing with what we all admit to be a major problem.

Mr. Freeth: I should like to pursue the line of argument used by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) about throwing the baby out with the bath water. I do this not so much because I believe myself to be an expert on the subject of this country remaining a financial centre of the world, but because it seems to me essential, unless we are to have to raise every year enough money by compulsory taxation to cover the Budget both above and below the line, that there should be a healthy gilt-edged market in order that the Government may pursue their funding operations. In this very year the Government will have to raise about £400 million in fresh money on the Stock Exchange.
It therefore seems to me that one of the aspects of the matter which the Government have to weigh very carefully is the way in which they discourage people from investing in Government securities—in other words, the amount by which they may discourage activity on the Stock Exchange, which discouragement they know will be to their own disadvantage.
I do not want to make any plea for those who dodge paying the taxes which they should pay or those who operate dividend stripping or bond washing on borrowed money. I merely say to the hon. Member for Gloucester (Mr. Diamond) that I am perfectly certain that my right hon. and hon. Friends on the Treasury Bench are capable of facing any bond or dividend, whether stripped or washed, and of dealing with the situation.
My plea is for the pension funds. Pension funds do not have to invest in Government securities. Indeed, pension fund after pension fund all over the country is building up the proportion of its securities which is invested outside the gilt-edged market. All sound pension funds know that they may have to meet in future years claims which are based on the retiring salaries of people who have worked for many years during periods of inflation rather than on retiring salaries which have remained the same over long periods. In such circumstances pension funds tend to wish to invest in equity shares. This movement has been going on for ten or twelve years.
In this Clause we are taking a definite step to make the gilt-edged market less attractive for pension funds, because if gilts are to be attractive to them it is essential that they shall from time to time, in accordance with the ratios between differing stocks, switch from one gilt-edged stock to another. Of course, it is a great help to them to be able to buy their stocks cum-dividend and to sell their stocks ex-dividend. I do not believe that it was necessary to stop them from doing this in order to stop tax dodging, and I think that the effects of subsection (4) go a little further than was necessary. One effect will be that if a pension fund has a switch open which it may wish to reverse in the near future, it will be unable to buy a stock which is likely to go ex-dividend within at any rate one month, and possibly six months, depending on how the courts interpret subsection (2).
That may well mean that they will be discouraged from buying Government stocks and thereby helping the Government with their funding programme. I therefore think that we should issue a slight warning to this Government and any Government that in their efforts to prevent tax dodging—efforts which are highly laudable—they should also take care that they do not ruin their own gilt-edged market, which, let us face it, since prices began to rise at the beginning of the last war has become progressively less attractive for large numbers of investors.

Mr. Houghton: The plea made by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) seemed to be, "Do not shoot the pianist. He is doing his

best." I am sure he is doing his best, but it does not seem to be quite good enough. Evidence of that is the time which we have to spend on this complicated Clause year by year.
I do not wish to detain the Committee for more than a moment, but I should deal with the point made by the hon. Member about doing nothing to discourage foreign money, hot money or any other sort of money from coming here. He suggested that we had to weigh the requirements of the protection of the Revenue against the preservation of our financial institutions in the interests of our national wealth and of our preeminent position in some branches of financial and monetary activity. We fully accept that. The difference between us is that the Government are content to avail themselves of the annual opportunity which the Finance Bill gives of stopping these matters, whereas we on this side of the Committee think that without any serious damage to Parliament or to the position of the taxpayer we could take the same measures sooner if we had the means for doing so. I think that that is the issue.
6.0 p.m.
I think that the Financial Secretary will admit that tax dodgers always get a start on the Revenue. They are always well away before any steps can be taken to stop them. A few of them get far away. It is only when they become more numerous that they are noticed. The Inland Revenue authorities are not able to keep track of these activities until the extent and the nature of them are reported. The intelligence services of the Inland Revenue obviously have to be sensitive to new forms of tax avoidance. They can then see what it is that is being done. Is it likely to become serious? Is it a gross abuse of our taxation code? As these points have to be considered, the tax dodgers will always get away before Parliament can stop them.
For one reason or another, either because the Finance Bill is full of other things or because there is a General Election which results in the Finance Bill being severely curtailed, or because the Chancellor of the Exchequer is not convinced that he ought to launch complicated Clauses on the House and


the Committee, these tax dodgers sometimes have several years' start. One can think of all sorts of reasons why we do not catch up with them rapidly enough.
No one can dispute what my hon. Friend the Member for Gloucester, (Mr. Diamond) said, and there was no dissent from the other side of the Committee. We agree with what he described as undesirable. He asked why these people should get away with it at the expense of other taxpayers. No one could see any reason why they should, but the problem is how to stop them.
There could be degrees of perseverance and determination in stopping these practices, but I am not going to suggest for a moment that hon. Gentlemen opposite are less zealous than we are in dealing with tax dodgers. All I am complaining about is that, apparently, the Government do not consider that we ought to provide ourselves with more rapid means of overtaking tax dodgers and stopping them. If we could make provisional orders which would at least freeze the position until Parliament could finally dispose of the matter, that would be one way of doing it. It is solely the difference of whether it is a month or a year.
I am convinced that the time will come when we shall have to overcome many of our traditional prejudices against the way in which we make these attempts on tax dodgers. If we do not, public opinion will become heavily weighted against the integrity of Governments and the power of Parliament. Permanent tax dodging is bad. It is bad for morale. I ought not to say it is bad for morals because we are told that there are no morals in tax dodging. "If it is lawful, do not moralise; take it as it is. If you do not like it, stop it, but for heaven's sake do not pontificate or preach." So I am not going to do that.
There is no doubt that it affects people, especially those who cannot dodge tax, even if it is only on the simple grounds of envy. Not only in this connection, but in others, too, I feel that with the increasing ingenuity on the part of those concerned and the large sums that are at stake the community will have to protect itself against these practices in a more determined and speedier

manner than seems available to us in the recurring opportunities of a Finance Bill.

Mr. Simon: The debate has turned on two main themes. The first is the general theme of tax avoidance and of what measures Parliament should take to deal with them. The second theme is concerned with the specific provisions of the Clause.
So far as the first theme is concerned, I ventured to point on one of the earlier Amendments the disadvantages of proceeding by Statutory Instrument, and the Committee would not expect, or, indeed, welcome, my repeating what I said. I should like to remind the Committee what the Royal Commission said about the complaint that year after year so much time has to be taken up in Committee in dealing with these antiavoidance measures.
The Royal Commission summed up its conclusions in this way:
We do not favour a departure from the present system of detailed legislative control of the various forms of tax avoidance that are thought to be obnoxious.
It then expatiates on that. The Report continues:
We envisage accordingly that it may be necessary to add to this legislation in the future by new enactments specifically designed to counter specific devices.
Finally, the Report says:
Whether new legislation is called for in any case is a practical question that depends primarily on the amount of revenue effected and the administrative cost of corrective measures.
I know that the hon. Gentleman the Member of Gloucester (Mr. Diamond) firmly believes that retrospection is the only way of dealing with this, but, as I said earlier, I do not believe that that commends itself generally to either side of the Committee. I pointed out the disadvantages of the alternative method which I find more attractive and which the hon. Gentleman the Member for Sowerby (Mr. Houghton) mentioned. I welcomed his statement that the Government and we on this side of the Committee deplore these practices. We are determined, so far as we are able, to ensure that the tax burden is fairly and evenly spread over the great body of taxpayers.
We deplore these practices whereby a fiction of the tax code is used to claw


back from the Revenue tax that has been paid by other taxpayers. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) was quite right when he said that one has only to examine the Statute Book to see how false the charge is that the Government are not serious in this matter.
The hon. Member for Gloucester accused me of misleading the Committee by using the phrase "bond washing". We have all used that phrase because we believe that this is no more than a variation of what we had before. What we had prior to 1937 was the position of a Surtax payer selling his security cum-dividend under a collusive agreement to buy it back ex-dividend. He thereby lost income and made a capital gain. This practice is the reverse. There is no collusive agreement, but, as we know to our painful cost by now, it is the purchase of a security cum-dividend by a dealing concern, the sale ex-dividend, and the charging against taxable income of what is an apparent loss that is, in fact, bridged by the dividend. That is quite a different thing from the dividend stripping which we were discussing last year. We are right to differentiate about that and there is no question of our misleading the Committee.
The hon. Gentleman asked why we had not acted earlier against these particular forms of bond washing. The answer is that in 1957 the Stock Exchange Committee altered its rules to deal with the new forms of bond washing which then became apparent. We all thought that that was sufficient. It was only when it became apparent that new forms were being devised which circumvented not only the earlier legislation, but also the Stock Exchange rules that we were prompt to strike against those operations.
The hon. Member also asked me about the information provision. That provision was needed under the 1952 Act, which re-enacted the earlier bond-washing legislation, because that dealt with a sale cum-dividend followed by a repurchase ex-dividend, so that the Surtax payer did not receive the dividend, and in the ordinary way there was nothing to show on his return for Income Tax purposes. The Inland Revenue therefore required the power

to go behind the return and gain the necessary information. On the present occasion we are dealing with people such as pension fund managers, who reclaim tax for invested income. As I have just said, they buy "cum" and sell "ex", so that there is no need for an information provision. What they are doing is to thrust the dividend claimed under the nose of the Inland Revenue.

Mr. Diamond: The hon. and learned Gentleman was very good in answering all the questions, but what he has just said has reminded me of a further question that I wanted to put to him but did not. He said that the Treasury knows to its cost what has happened. Can he give us any idea how much tax has been lost through bond washing?

Mr. Simon: I find it impossible to answer that, because many of the claims will come in only when the returns are made next year.
I am sure that my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) was right in saying that we must consider the fact that London is unrivalled in the world as a financial centre, and that my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) was also right in saying that pension funds do not have to invest in Government securities. For that reason we have sought not to strike at legitimate dealing,—and I believe we are right in so deciding. We have sought to preserve the position of the discount houses and the jobbers on the London Stock Exchange who make the market in giltedged, but we do not think that we have gone too far, as my hon. Friend suggested.
The normal practice of a pension fund is to have a portfolio with maturities spread according to the actuarial expectation of the falling in of their obligations. I do not believe that the practice that some pension fund managers have been adopting, of playing the market and buying up dividends, is the proper function of a pension fund, nor do I believe that a regulation of this sort very much impairs the efficiency of the market. We believe that the balance we have struck leaves the market substantially unimpaired, and that such impairment as is caused is justified for the protection of the Revenue—in other words the general


body of taxpayers. Under those circumstances I commend the Clause to the Committee.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 19.—(PURCHASE AND SALE OF SECURITIES: DEALERS IN SECURITIES.)

6.15 p.m.

The Solicitor-General (Sir Harry Hylton-Foster): I beg to move, in page 17, line 43, to leave out subsection (2) and to insert:
(2) The foregoing subsection shall not apply if the first buyer—

(a) is in the opinion of the Commissioners of Inland Revenue bona fide carrying on the business of a discount house in the United Kingdom, or
(b) is a member of the London Stock Exchange who is recognised by the committee thereof as carrying on the business of a jobber, or
(c) is a member of any other stock exchange in the United Kingdom who is recognised by the committee thereof as carrying on the business of a dealer,
and the securities were bought in the ordinary course of his said business and, in the case of a dealer such as is mentioned in paragraph (c) of this subsection, were securities in which he was authorised by the said committee to deal.
This is little more than a drafting Amendment. It seemed right to seek to define the scope of the exemption a little more closely. The persons exempted in subsection (2) are the discount houses and members of Stock Exchanges. The particular members of Stock Exchanges are lumped together in one category in the existing draft, that is to say, jobbers on the London Stock Exchange and dealers on provincial stock exchanges who are specially recognised by the committee of their exchange as carrying on the business in particular securities—for example, those quoted locally, but not elsewhere.
For the sake of clarity the Amendment splits up the members of stock exchanges referred to. In the case of members on the London Stock Exchange those referred to are persons who deal, namely, the jobbers. The brokers are not included. That is made clear by paragraph (b). In the case of the provincial stock exchanges, the persons exempted are those who operate in a

dual capacity, so to speak, in relation to certain securities. The terms of the Amendment make it plain in a convenient way that the exemption will be confined to those securities in which the dealers concerned are authorised to deal by the committee of their stock exchange.

Mr. Stevens: My right hon. and learned Friend has said that the Amendment seeks to define more clearly those who are legitimate dealers, and in the debate on Clause 18 my hon. and learned Friend said that the Government wished to avoid striking at legitimate dealers. That Clause specifies discount houses, and can refer only to the 12 officially recognised discount houses in the United Kingdom. It also refers to jobbers on the London Stock Exchange, and those recognised as dealers on other stock exchanges in the United Kingdom.
My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) mentioned the case of the smaller banks, and I should like to know why my right hon. Friend the Chancellor decided to exclude them. Many of them have substantial foreign funds in their possession in this country. If they are affected by the Clause they will be able to offer only a low return, so that the foreign lender may be tempted to take his funds away from the country. That would do us serious hurt. What consideration was given to the position of those smaller banks, and why have they been excluded?

Mr. Simon: We have drafted the exemptions to the Clause to preserve what is strictly necessary for the proper functioning of the gilt-edged market. That can be restricted to the jobbers on the London Stock Exchange, the dealers in local securities on provincial stock exchanges, and the discount houses. There is nothing to prevent other institutions operating in the market. All we are saying is that they are not necessary to its functioning. If they wish to operate to buy cum-dividend and to sell ex-dividend there is nothing to prevent them, but if they do so we are providing that the dividend should rank against their taxable profit, so that they cannot, as a dealing concern, show a notional loss to set against their taxable profits in other ways.
It is for that reason that we did not feel it possible to enlarge the scope of the Clause to bring in other sorts of dealing concerns. Once we brought any in it would be virtually impossible to draw the line. Therefore, we drew the line so as to include only those institutions which are necessary for the functioning of the gilt-edged market.

Mr. Edward du Cann: May I ask a question of my hon. and learned Friend? In replying to my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens), my hon. and learned Friend stressed that he is concerned with operations in the gilt-edged market. I take the point, which is tremendously important, and understand exactly what it is that he and my right hon. Friend the Chancellor are trying to do. But is it not the fact that these three categories of persons, discount houses, jobbers on the London Stock Exchange and dealers on any other stock exchange, could deal in securities other titan gilt-edged?

Mr. Simon: First, bond washing has been in gilt-edged. Secondly, the discount houses specialise in this respect in gilt-edged securities. The jobbers are those jobbers on the London Stock Exchange who are recognised as jobbers by the Committee of the London Stock Exchange and, presumably, there is no reason why the jobbers who job in other markets should not make a bargain in the gilt-edged market. But in so far as they do that, they help to provide the market and we think there is no reason, in fact it would be impossible, to try to differentiate.

Mr. Houghton: On behalf of my right hon. and hon. Friends, I think that I may say that we find the Amendment acceptable. The explanation convinces us. It makes for security, especially with regard to members of the London Stock Exchange.

Amendment agreed to.

Mr. du Cann: I beg to move, in page 18, line 4, at the end to insert:
(3) If the first buyer is engaged in carrying on a trade which consists of or includes dealings in securities and if either

(a) the purchase is effected on a stock exchange in the United Kingdom and the subsequent sale is effected outside the United Kingdom; or

(b) the purchase is effected on a stock exchange outside the United Kingdom and the subsequent sale is effected inside the United Kingdom; or
(c) both the purchase and the subsequent sale are effected on stock exchanges which are situate in different countries outside the United Kingdom,
then subsection (1) of this section shall not apply.
The short discussions that we have had in relation to these extremely complicated subjects have served to illustrate their complexity and difficulty and I suppose it is the general wish of the Committee not simply to contain bond washing and dividend stripping together or separately as the case may be, but to prevent them. At the same time, it has been clearly emphasised that it is also the wish of the Committee not to penalise persons engaged in legitimate trade, nor to curtail their activities in any way.
I wish to draw particular attention to the position of firms and persons who, in my submission, are benefiting this country, and, indeed, the economic framework of the City of London as a whole, by dealing as arbitrageurs in foreign securities and earning invisible assets for our country. Because it is not the intention to penalise persons engaged in legitimate business we have certain exemptions which my right hon. and learned Friend the Solicitor-General has been defining and explaining, and we have agreed that it is right and proper that there should be those exemptions.
Everyone knows that over a period of years the City of London has engaged in a vast volume of international trade, in bullion and foreign exchange, and now I suggest to the Committee that it is beginning to deal more and more in investments and securities. I think that the Committee would agree that investment is becoming an increasingly international matter. This has come about largely because of the growth of ideas like the European Common Market, and so on.
The main examples of this increased international interest in investment have been the inclusion of British Commonwealth and European securities in the portfolios of American mutual companies, the establishment of European investment trusts and so on. Indeed, one of our own great domestic companies, the Shell Company, went to


Switzerland a short while ago to raise money because it was convenient to do so. I suggest that there are many securities, British securities among others, which enjoy an international as opposed to a purely national market. I also suggest that that tendency is likely to grow in the future and bring with it a large potential earning of foreign currency if we play our cards right in the City of London.
An arbitrager is rather like a jobber: he matches a buyer with a seller and he will buy and sell in different markets. As the Committee will understand, according to the habit or practice of different markets it is possible in securities to go ex-dividend in different markets at different times. The practice may vary in London, New York and Paris and so on, and as a matter of fact that is very often the case. It may therefore happen—it will probably happen more often in the field of arbitrage—that the arbitrager may easily buy cum-dividend and sell ex-dividend. There is nothing improper or wrong or immoral about that. The arbitrageur is carrying out his ordinary business in dealing in securities. It is incidental to his ordinary business.
The arbitrageur in foreign securities—when I talk about foreign securities I include, also, Commonwealth securities—has, to date, been allowed to take credit for the gross amount of the dividend as ordinary trading revenue. That is perfectly fair and legitimate and no one is suggesting that he has taken anything which he should not. Under the Bill as it stands, and particularly after having dealt with the Amendment moved by my right hon. and learned Friend the Solicitor-General, this kind of dealer, or the jobbers on the London Stock Exchange or dealers on any other stock exchange, may continue to carry on this ordinary trading operation if they wish, but no one else may. No merchant bank or broker on the London Stock Exchange may do so. I am unable to understand the reason for this difference and the Amendment which I am moving is designed to remove it.
Emphasising, again, the complexity of this matter—it is a complicated and difficult matter—I do not suggest that this Amendment is necessarily right, but I feel that it goes some way towards dealing with this problem. The Amend-

ment suggests that if the first buyer is carrying on a trade in securities, which I think is the fundamental point, then if the purchase of the security is effected on a stock exchange in the United Kingdom and the sale is effected outside, or if the purchase is effected outside and the sale is effected inside the United Kingdom, or if the purchase and sale are both effected on stock exchanges in different countries outside the United Kingdom the arbitrageur should be given exemption from the general operation of this Clause, or the two Clauses together.
I wish to quote from the City notes which appeared in The Times on this subject, although I realise that at the moment it is rather a touchy matter to quote The Times in this Chamber. I am quoting from the issue of The Times of Thursday, 7th May where, in the City notes, it states:
… on general grounds, it is difficult to reconcile a reduction in arbitrage business in London with the lines of official financial policy.
I believe that to be true.
Everything the Government are seeking to do, and which I warmly support, is an endeavour to liberalise trade and trading activities between one country and another. We depend on trade more than any other country in the world. In the past we have grown great by our skill in international dealings. At the risk of wearying the Committee I would repeat that I believe that there is bound to be increasing international interest in and awareness of investment. It seems to me that to penalise the small number of people interested in this subject is to do the country in general a disservice.
My hon. Friend the Member for Walsall (Sir H. d'Avigdor-Goldsmid) said in his excellent speech that in his opinion it was the general view in the City of London that my right hon. Friend the Chancellor had got this Clause in the Bill just about right. That, I respectfully suggest, is not the case. People who are acting as arbitrageurs, in the sense that they are dealing internationally, are not doing wrong. We should do well to foster their activities and encourage them, rather than say, "You shall do no more of this work". I hope that the Financial Secretary to the Treasury will say that he will look at this matter again.

6.30 p.m.

Mr. Simon: This Amendment covers to a great extent the same ground as the earlier Amendment moved by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens). At the conclusion of the debate on that Amendment my hon. Friend was good enough to say that I had convinced him, and he withdrew the Amendment. I hope that I shall have the same success with my hon. Friend the Member for Taunton (Mr. du Cann). The point is precisely the same even though the Amendment is slightly differently phrased.
The Amendment would exempt the arbitrage business from the Clause. As my hon. Friend pointed out, arbitrage is perfectly legitimate. There is nothing improper, immoral or wrong in it. It merely consists of buying internationally-quoted securities in one market, where they stand at a discount, and selling them in another where they stand at a premium, and making a profit on the difference in rates. That operation performs a useful economic function in bringing the rates together and in providing a super-market—if that is not a specialist term these days—in securities.
The main idea is to make a profit on the exchange rates, which is perfectly possible in the ordinary "cum" and "ex" dealing that we have been talking about. To make a profit out of the tax by buying cum-dividend in, say, Zurich arid selling ex-dividend in England, resulting in artificial loss, is exactly the same thing as we have been discussing on Clause 18. The artificial loss is set against the exchange profit. Even though that sort of transaction has a commercial justification, the cum and ex artificial loss is, from our point of view, of exactly the same character as that which the whole Committee has agreed that we should strike at. It is using a fiction of the law to derive a tax advantage.
It is true that jobbers on the London Stock Exchange and authorised and approved discount-houses all may carry on arbitrage business in the ordinary course of their business. My hon. Friend is wrong when he goes on to say that nobody else may carry on arbitrage business. Nobody is prevented from carrying on arbitrage business at all. All we are doing is to say that when this fictional loss is incurred on

the arbitrage business in the case of a purchase cum and a sale ex, that loss shall not be deductible from the taxable income.
Therefore, it is, in my respectful submission, necessary to keep the arbitrage business, except when it is carried on by the discount houses and the jobbers, within the ambit of the Clause. I may be asked why we should exempt the discount houses and the jobbers. This is a point which the Committee has discussed and approved of. It is because those institutions are necessary to provide a market. There is this further reason that, providing a market, they have to take up stock as it is offered to them and as often as they are buying cum and selling ex they are selling cum and buying ex. The losses and the gains even each other out. I would therefore ask my hon. Friend to follow the excellent example which I have mentioned and to ask leave to withdraw the Amendment.

Mr. du Cann: I know that my hon. and learned Friend is fair-minded and that he will look again at this argument. If he feels that it has validity perhaps he will bring it forward for the next stage of the Bill.
I accept the correction that he made. I did not mean that all arbitrage was stopped, but it cannot be right to say to one section of people, "All right. You can go on doing it in that way", and to another section, "I am sorry. You cannot do it in this way". That is discriminating against perfectly reasonable people and does not seem fair or right. It is a great pity that we should do anything to militate against foreign investment in this country when we are voraciously hungry for capital, as the Cohen Report has shown. Anything that we can do to encourage people to invest in the United Kingdom will be of advantage to our economy.
I regret any step in dealing with British securities that would have that effect but, bearing in mind that my hon. and learned Friend is fair-minded and will make further inquiry, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The Solicitor-General: I beg to move, in page 18, line 11, at the end to add:
(4) Subsection (1) of this section shall not apply if the interest is to any extent required


to be brought into account under section four of the Finance (No. 2) Act, 1955, as if it were a trading receipt which had not borne tax, or would to any extent be so required to be brought into account but for the provisions of paragraph 2 of the Third Schedule to that Act (which exclude dividends at rates not unusually high payable on shares acquired during the preceding twelve months).
The Amendment is required because there is a potential overlap between the legislation which the Committee is now considering and the anti-dividend-stripping legislation that we put on the Statute Book in 1955 and have extended since. If we did not have a provision such as this we might be subjecting the sinner to a double imposition in respect of his activity, to a double adjustment of his tax. It is not desired to produce that result.
It would happen, because one transaction caught by the 1955 dividend-stripping legislation would produce the tax result that the net result of dividend stripping would be brought into account as a trading receipt which had not borne tax by virtue of that legislation, and the very same transaction caught by Clause 19 of the Bill would have to have the purchase price of the securities which had been bought diminished by the pre-acquisition element of interest, for tax purposes; that is to say, a kind of double adjustment of one transaction under different heads, different anti-taxavoidance laws.
The Amendment gets rid of that difficulty. If the Committee will look at the words to
trading receipt which had not borne tax",
they will see that the first part of the proposed new subsection prevents the Clause biting in the case where the interest has already been caught under the 1955 legislation. The words that remain are there for a different reason. The buying up of shares may be a totally legitimate transaction in every way. When we were dealing with dividend stripping we did so on the basis, broadly, of treating the dividend, being tested, as though it were paid out of post-acquisition profits in so far as there were post-acquisition profits out of which it could have been paid.
The Committee will recall that there was a further exemption, so to speak, a further excuse. It works by express terms in relation to a dividend paid

within one year and the conditions were, either, that the dividend should not materially exceed the annual rate of dividend on the shares in the three years before acquisition, or, if the shares were held by an issuing house in the ordinary course of its business, the dividend, though showing an increase over the annual rate of three previous years, is no more than a reasonable return on the working capital which the issuing house laid out on the purchase of the shares.
We put that in, so the Committee might remember—everyone in the Committee, not excepting the hon. Member for Gloucester (Mr. Diamond)—from the provisions of paragraph 2 of the Third Schedule in the 1955 Act. Clearly, there should be, one would think, parallel exemptions in relation to this legislation and for that reason the latter half of the proposed new subsection is where it is.
I hope that it will not be suggested that we are running some abnormal risk in this matter or enlarging the let-out too much because the dividend-stripping legislation applies to company shares. As the Committee knows, such specimens as we have encountered of this particular kind of bond washing—that is to say, the kind that the hon. Member for Gloucester says is not bond washing, but he will know what I mean—apply only, of course, to gilt-edged securities.

Mr. Diamond: I say straight away that I welcome this Amendment. I decided before I heard the right hon. and learned Gentleman that it was a good Amendment. Having followed everything he said most carefully, I could not think of anything he said sufficiently well to make me alter my views.
A number of colleagues in my profession, including the hon. Member for Portsmouth, Langstone (Mr. Stevens), to whom this appearance of double taxation came to mind, are interested in this matter. The hon. Member put forward an Amendment very similar to this and no doubt it prompted this one. I welcome it as further evidence of the fact that the Government realise that what they were talking of from the beginning was dividend stripping. If they had looked at the provisions straight away when drafting the Bill, this Amendment could have been made straight away.

Mr. Stevens: I must say that I have had more success with those of my Amendments which have not been selected than with those which have been selected and on which I have been smitten hip and thigh by both Front Benches. As Amendment No. 57 comes before Amendment No. 31 on the Notice Paper, and as my intention was the same as that of the Chancellor of the Exchequer, there is no difficulty in seeing which came first, the chicken or the egg. I thank my right hon. and learned Friend for expressing this matter in better language than I could have used.

The Solicitor-General: It was only because the Committee was groaning at the length of my observations that I, unhappily, forgot to thank my hon. Friend in this instance.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 20 ordered to stand part of the Bill.

Clause 21.—(PURCHASE AND SALE OF SECURITIES: TRADERS OTHER THAN DEALERS IN SECURITIES.)

Amendment made: In page 19, line 23, after "(3)" insert "or (4)".—[Mr. Simon.]

Clause, as amended, ordered to stand part of the Bill.

Consideration of postponed Clauses 22 to 28 and of new Clauses further postponed till after consideration of Schedule 6 —[Mr. Simon.]

Sixth Schedule.—(PURCHASE AND SALE OF SECURITIES: "APPROPRIATE AMOUNT IN RESPECT OF INTEREST.")

6.45 p.m.

Mr. Simon: I beg to move, in page 32, line 19, at the end to insert:
Provided that, where the capital amount of the securities was not fully paid at the beginning of the said period and one or more instalments of capital were paid during that period—

(a) the interest shall be treated as divided into parts, calculated by reference to the amount of the interest attributable to the capital paid at or before the beginning of the said period and the amount thereof attributable to each such instalment, and
(b) treating each of the said parts as interest payable for the said period or, where the part was calculated by reference to any such instalment, as interest payable for the part of the said period beginning with the

payment of the instalment, there shall be calculated, in accordance with the foregoing provisions of this paragraph, the amount constituting the appropriate proportion of each part, and
(c) the appropriate proportion of the interest for the purposes of the foregoing paragraphs shall be the proportion thereof constituted by the sum of the said amounts.
This is a complicated Amendment. It is the sort of Amendment to which the Royal Commission referred when it said, of tax legislation:
Not infrequently its conceptions represent an attempt to dress what are really mathematical formulae in the vesture of English prose.
This is one of those cases where it is impracticable, unless one is prepared to put an algebraical formula into the Statute Book, to expect that we can legislate with the simplicity we all desire.
The purpose of the Amendment is to lay down a formula for apportioning, up to the date of purchase, the first interest payment on a security where that security has not been bought outright but has been issued on terms that the total amount to be subscribed would be paid up by two or more instalments over a period. This point was drawn to our attention by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) and I should like to express our appreciation to him.
The context is the principle of the Schedule, generally, whereby, as hon. Members have seen, we try to carry out two purposes. The first is to say whether the appropriate amount of interest should be the net interest or the gross interest. We have said that in Clause 19 it should be the net interest and in Clauses 20 and 21 it should be the gross interest. We have tried to arrive at a fair apportionment of the proportion of the dividend to be debited to the taxpayer, the bond washer. It is obviously right that if, for example, he has to hold the bond for five months before it goes ex-dividend the whole of the interest should not be debited against the loss he claims for tax purposes, but only the interest for one month.
A formula is set out in paragraph 3 of the Schedule, but it did not cover the case where there is a payment by instalments for a security of, say, £300 on application, £100 at one month after the date of issue and the final £100 six months after the date of issue. I can go


into the matter in greater detail if the Committee wishes me to do so, but, unless there is that desire, perhaps it is sufficient that I commend the Amendment to the Committee.

Amendment agreed to.

Schedule, as amended, agreed to.

Clause 22 ordered to stand part of the Bill.

Consideration of postponed Clauses 23 to 28 and of new Clauses further postponed till after consideration of Schedule 7.—[Mr. Simon.]

Seventh Schedule agreed to.

Clauses 23 and 24 ordered to stand part of the Bill.

Clause 25.—(PROFITS TAX: INCREASE OF LIMITS ON DEDUCTIONS FOR DIRECTORS' REMUNERATION.)

Mr. Diamond: I beg to move, in page 21, line 45, to leave out "three thousand" and to insert "two thousand seven hundred and fifty".

The Temporary Chairman: It would be convenient if the Committee also discussed the Amendments in page 22, line 1, to leave out "five thousand" and to insert "four thousand five hundred"; in line 3, to leave out "seven thousand" and to insert "six thousand two hundred and fifty"; in line 4, to leave out "nine" and to insert "eight"; and in line 6, to leave out "two thousand" and to insert "one thousand seven hundred and fifty".

Mr. Diamond: Mr. Blackburn, you have, as usual, conducted our affairs with such competence and speed that one is caught a little unaware sometimes when moving an Amendment.
This Amendment describes its purpose clearly. It is partly to ask the Government why they have in mind this increase in the limits of directors' remuneration for Profits Tax purposes and also to suggest that although, perhaps, a small increase would not be inappropriate, having regard to the passage of time, they have gone too far, as usual, in looking after directors.
The Clause gives a Profits Tax benefit to a company which is director-controlled inasmuch as it permits the company to charge against its profits for Profits Tax purposes a remuneration for

its directors greater than was previously charged. It is well understood that where a company is virtually under the control of its directors some arbitrary limitation has to be put on the remuneration which is allowable for the purpose of this tax, otherwise it would be within their powers to regard the whole of the profits made, if necessary, as their remuneration and therefore escape Profits Tax completely. We all understand that principle, and we understand that it is perhaps necessary from time to time to revise those rates upwards slightly.
Why has it been thought necessary to go as far as this today? Since the rates of directors' remuneration were first provided, the Profits Tax has been altered. The rate of Profits Tax has been effectively reduced and we have one rate instead of two rates. In other words, there is less tax to pay and less of a burden on a company which decides to pay its directors a greater remuneration than that permitted for this purpose.
The Committee will well understand that nobody is preventing a company from paying its directors what it wants to pay them, but if it pays directors above a certain amount in certain circumstances, then part of it should be regarded as not having been made for the purpose of Profits Tax payment. That is one reason why the limit should have been reduced rather than increased.
Another reason which I am bound to draw to the Committee's attention is that directors pay a smaller effective rate of tax than most of the rest of the community. They pay a smaller effective rate of tax because directors in this position have opportunities for enjoying tax-free benefits to a much greater extent than others. It is inevitable that this should happen. I am not suggesting that there is anything particularly wrong with this. It is inevitable that it should happen. Competition between one company and another brings it about. The fact remains that the employee has no benefits of this kind. He has to pay tax on the amount he has been paid. The rate on which he is taxed is the real rate of his income. The rate on which the director pays tax is not the real rate of his spendable income, the income which accrues to him in the benefit which he draws from his occupation.
That being the case, it is inevitable that we should look much more closely at the remuneration which is allowed to directors. Although this is purely a taxation provision, it is a sign that the Government are encouraging directors to draw more out of director-controlled companies than previously. Our Amendments seek to raise a discussion on this and to suggest that the Government are going too far in this direction.

The Economic Secretary to the Treasury (Mr. F. J. Erroll): I was interested in listening to the remarks made by the hon. Member for Gloucester (Mr. Diamond) to hear that he did not quarrel with the principle enshrined in earlier legislation that some part of the whole-time director's remuneration should be regarded as remuneration and not as profits from the enterprise in which he was working and which he was controlling. The difference between us, therefore, is simply whether the amount should be raised and, if so, by how much. I imagine that if the Opposition had felt that the amount should not be raised at all they would have preferred to vote against the Clause, instead of which they have chosen an alternative method of registering their views—that of proposing Amendments which would reduce the increases which we have proposed in the Clause.
They thereby accept that there is some merit in making an increase. Their only dispute is over the size of the increase. That being so, I think that the figures which I can give to the Committee will show that what we have proposed is the right course of action. In the first place, we are not suggesting that there should be any increase in the maximum figure, namely, 15 per cent. of profits up to £100,000, which would make the maximum amount of remuneration for which this relief will be applicable £15,000. It is only in the alternative method, where the profits are not big enough to give what is believed to be an adequate amount of remuneration—a principle which was accepted in the 1952 Finance Act—that there is any difference of opinion.
It is here that we have suggested in the Clause that there should be an increase of varying amounts. We propose that the first working director should

have the maximum figure raised from £2,500 to £3,000, that is, an increase of 20 per cent., whereas the Amendment would raise it only to £2,750. In the case of the second, third and fourth directors the increase is from £1,500 to £2,000, an increase of 33⅓ per cent.
The present limit of £2,500 was laid down in 1947 and confirmed in 1952, but during the period 1952–58, during which there was no increase in the limit, the average weekly earnings of weekly wage earners increased by no less than 43 per cent. It is surely not out of line to permit an increase of 20 per cent. for the first working director and 33⅓ per cent. for the second, third and fourth working directors. It seems a reasonable adjustment to make in the light of the general movement in the levels of remuneration.
7.0 p.m.
As regards relief from Profits Tax, the hon. Member for Gloucester referred particularly to the fact that Profits Tax rates had changed. I accept that, but what is at stake is the principle whether this additional remuneration should attract Profits Tax in addition to Income Tax and Surtax in the hands of the director. The rate of Profits Tax in these circumstances is not relevant to the principle.
The fact that Profits Tax is now at the single rate of 10 per cent. means that the amount of actual relief to any company will be rather less than it might have been a year ago. The maximum relief to any one company will be only £200, that is to say, the increase in the maximum from £7,000 to £9,000, calculated at the rate of 10 per cent. Two thousand pounds divided by ten gives a maximum relief of £200 to any one company, so no one company can benefit very greatly.
We estimate that there are about 35,000 director-controlled companies who will benefit to some extent and that the average will probably be about £85 per company. Therefore, the sums of money involved are not very great. There is no massive benefit to be handed to a particular type of company or a particular class of individual, whether he is over-privileged, as the hon. Gentleman rather suggested, or whether he is saddled with a greater share of responsibility than any other members of the


community have to bear. That is not a matter which need be argued at present. The Clause is a move in the direction of equity. The figures we have selected are borne out by the facts, and the Amendment proposed by the hon. Member for Gloucester should accordingly be resisted.

Mr. Houghton: We on this side of the Committee are not fully convinced of the justification for going as far as the Government propose. The Committee must bear in mind that we are dealing solely with director-controlled companies. The need to put a limit on the amount chargeable against taxable profits in respect of directors' remuneration has been accepted on both sides of the Committee, because, being director-controlled, they can do pretty well anything they like and can arrange their remuneration to suit themselves. It may not on any commercial basis necessarily be fair remuneration for services rendered. It is obvious that some limits had to be placed on what can be charged against the profits of a company for remuneration of directors, or they could have arranged their affairs to attract the least amount of Profits Tax. There may be a point at which the liability of the individual director for Surtax would cancel out the advantage he might receive in any other direction, but in many of these companies that point would not arise.
The Economic Secretary suggested that the proposed increases are not out of line with what might be regarded as appropriate increases having regard to changes in the level of remuneration since the last increase was made. As my hon. Friend the Member for Gloucester (Mr. Diamond) pointed out, these companies are to have the benefit of the reduction in Profits Tax made last year. The Economic Secretary said that things must be kept in their proper compartments and that this was a question of equity. I have no doubt that the hon.

Gentleman will discount my reference to the fact that these companies will also have the benefit of the reduction in the standard rate of Income Tax in the Bill.

One must look at the position of these companies in relation to the burden of taxation having regard to the fact that they are director-controlled, that they can arrange their remuneration in any manner they please and that they are to a certain extent artificial organisms. In view of the reduction in Profits Tax last year, in view of the reduction in the standard rate of Income Tax this year and in view of the reliefs which directors, in common with others, have received for Surtax purposes and in earned income relief, do we now need to go this far in relieving them of further taxation? My right hon. and hon. Friends and I think that we do not. That is the difference between the two sides of the Committee.

As the Economic Secretary pointed out, our Amendments indicate our willingness to go some way, but not all the way envisaged by the Government's proposals. It is a matter of judgment of what is right and fair, and one can argue it indefinitely without getting any nearer to agreement because, despite figures and cross-references, there is in the end a composite judgment whether these companies are being treated fairly. I do not want to suggest that they are perhaps more favourably placed than most taxpayers to arrange their affairs so as to attract the least taxation, but I think that we all recognise that many of the directors of these companies are in various ways very happily placed indeed.

In those circumstances, I can only say that our judgment falls short of that of the Government and that we propose to indicate that in the usual way.

Question put, That "three thousand" stand part of the Clause:—

The Committee divided: Ayes 207, Noes 167.

Division No. 126.]
AYES
[7.7 p.m.


Agnew, Sir Peter
Barber, Anthony
Biggs-Davison, J. A.


Altken, W. T.
Barlow, Sir John
Bingham, R. M.


Amory, Rt. Hn. Heathcoat (Tiverton)
Barter, John
Bishop, F. P.


Arbuthnot, John
Batsford, Brian
Body, R. F.


Armstrong, C. W.
Bell, Philip (Bolton, E.)
Bossom, Sir Alfred


Ashton, H.
Bell, Ronald (Bucks, S.)
Bowen, E. R. (Cardigan)


Atkins, H. E.
Bennett, F. M. (Torquay)
Boyd-Carpenter, Rt. Hon. J. A.


Baldock, Lt.-Cmdr. J. M.
Bennett, Dr. Reginald
Braine, B. R.


Baldwin, Sir Archer
Bevins, J. R. (Toxteth)
Braithwaite, Sir Albert (Harrow, W.)


Balniel, Lord
Bidgood, J. C.
Brewis, John




Browne, J. Nixon (Craigton)
Henderson, John (Cathcart)
Page, R. G.


Bryan, P.
Henderson-Stewart, Sir James
Partridge, E.


Butcher, Sir Herbert
Hill, Rt. Hon. Charles (Luton)
Peel, W. J.


Campbell, Sir David
Hill, John (S. Norfolk)
Peyton, J. W. W.


Carr, Robert
Hirst, Geoffrey
Pike, Miss Mervyn


Cary, Sir Robert
Hobson, John (Warwick &amp; Leam'gt'n)
Pilkington, Capt. R. A.


Clarke, Brig. Terence (Portsmth, W.)
Holland-Martin, C. J.
Pitman, I. J.


Cole, Norman
Holt, A. F.
Pitt, Miss E. M.


Cooper-Key, E. M.
Hornby, R. P.
Pott, H. P.


Cordeaux, Lt.-Col. J. K.
Hornsby-Smith, Miss M. P.
Powell, J. Enoch


Corfield, F. V.
Horsbrugh, Rt. Hon. Dame Florence
Price, David (Eastleigh)


Craddock, Beresford (Spelthorne)
Howard, Gerald (Cambridgeshire)
Price, Henry (Lewisham, W)


Crosthwaite-Eyre, Col. O. E.
Hughes Hallett, Vice-Admiral J.
Prior-Palmer, Brig. O. L.


Crowder, Sir John (Finchley)
Hughes-Young, M. H. C.
Ramsden, J. E.


Crowder, Petre (Ruislip—Northwood)
Hutchison, Michael Clark (E'b'gh, S.)
Rawlinson, Peter


Cunningham, Knox
Hylton-Foster, Rt. Hon. Sir Harry
Redmayne, M.


Currie, G. B. H.
Iremonger, T. L.
Remnant, Hon. P.


Davidson, Viscountess
Irvine, Bryant Godman (Rye)
Renton, D. L. M.


D'Avigdor-Goldsmid, Sir Henry
Jenkins, Robert (Dulwich)
Ridsdale, J. E.


Deedes, W. F.
Jennings, J. C. (Burton)
Rodgers, John (Sevenoaks)


de Ferranti, Basil
Jennings, Sir Roland (Hallam)
Roper, Sir Harold


Dodds-Parker, A. D.
Johnson, Dr. Donald (Carlisle)
Ropner, Col. Sir Leonard


Donaldson, Cmdr. C. E. McA.
Johnson, Eric (Blackley)
Russell, R. S.


Doughty, C. J. A.
Jones, Rt. Hon. Aubrey (Hall Green)
Scott-Miller, Cmdr. R.


du Cann, E. D. L.
Joseph, Sir Keith
Sharples, R. C.


Duncan, Sir James
Kerr, Sir Hamilton
Shepherd, William


Duthie, W. S.
Kirk, P. M.
Simon, J. E. S. (Middlesbrough, W.)


Eden, J. B. (Bournemouth, West)
Lambton, Viscount
Smithers, Peter (Winchester)


Elliott, R.W.(Newcastleupon Tyne, N.)
Leavey, J. A.
Spearman, Sir Alexander


Errington, Sir Eric
Legge-Bourke, Maj. E. A. H.
Speir, R. M.


Erroll, F. J.
Legh, Hon. Peter (Petersfield)
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)


Farey-Jones, F. W.
Lindsay, Hon. James (Devon, N.)
Stanley, Capt. Hon. Richard


Fell, A.
Lindsay, Martin (Solihull)
Stevens, Geoffrey


Finlay, Graeme
Lloyd, Maj. Sir Guy (Renfrew, E.)
Steward, Harold (Stockport, S.)


Fisher, Nigel
Loveys, Walter H.
Steward, Sir William (Woolwich, W.)


Fletcher-Cooke, C.
Lucas, Sir Jocelyn (Portsmouth, S.)
Storey, S.


Freeth, Denzil
Lucas-Tooth, Sir Hugh
Stuart, Rt. Hon. James (Moray)


Gammans, Lady
Macdonald, Sir Peter
Taylor, William (Bradford, N.)


Garner-Evans, E H.
McLaughlin, Mrs. P.
Temple, John M.


George, J. C. (Pollok)
Maclean, Sir Fitzroy (Lancaster)
Thompson, Kenneth (Walton)


Gibson-Watt, D.
MacLeod, John (Ross &amp; Cromarty)
Thornton-Kemsley, Sir Colin


Glover, D.
McMaster, Stanley
Tiley, A. (Bradford, W.)


Glyn, Col. Richard H.
Maddan, Martin
Turton, Rt. Hon. R. H.


Godber, J. B.
Markham, Major Sir Frank
Tweedsmuir, Lady


Gower, H. R.
Marlowe, A. A. H.
Vane, W. M. F.


Graham, Sir Fergus
Mathew, R.
Wade, D. W.


Grant, Rt. Hon. W. (Woodside)
Mawby, R. L.
Wakefield, Edward (Derbyshire, W.)


Grant-Ferris, Wg Cdr. R. (Nantwich)
Maydon, Lt.-Comdr, S. L. C.
Wall, Patrick


Gresham Cooke, R.
Molson, Rt. Hon. Hugh
Ward, Rt. Hon. G. R. (Worcester)


Grimston, Hon. John (St. Albans)
Morrison, John (Salisbury)
Ward, Dame Irene (Tynemouth)


Grimston, Sir Robert (Westbury)
Mott-Radclyffe, Sir Charles
Webbe, Sir H.


Grosvenor, Lt.-Col. R. G.
Nairn, D. L. S.
Webster, David


Harris, Frederic (Croydon, N.W.)
Neave, Airey
Williams, Paul (Sunderland, S.)


Harrison, A. B. C. (Maldon)
Nicholls, Harmar
Williams, R. Dudley (Exeter)


Harrison, Col. J. H. (Eye)
Nicholson, Sir Godfrey (Farnham)
Wills, Sir Gerald (Bridgwater)


Harvey, Sir Arthur Vere (Macclesf'd)
Nicolson, N. (B'n'm'th, E. &amp; Chr'oh)
Wolrige-Gordon, Patrick


Harvey, John (Walthamstow, E.)
Noble, Comdr., Rt. Hon. Allan
Woollam, John Victor


Hay, John
Noble, Michael (Argyll)



Heald, Rt. Hon. Sir Lionel
Oakshott, H. D.
TELLERS FOR THE AYES:


Heath, Rt. Hon. E. R. G.
O'Neill, Hn. Phelim (Co. Antrim, N)
Mr. Brooman-White and




Mr. Chichester-Clark.




NOES


Abse, Leo
Callaghan, L. J.
Evans, Albert (Islington, S.W.)


Ainsley, J. W.
Carmichael, J.
Finch, H. J. (Bedwellty)


Allaun, Frank (Salford, E.)
Champion, A. J.
Fitch, A. E. (Wigan)


Awbery, S. S.
Chapman, W. D.
Fletcher, Eric


Bacon, Miss Alice
Clunie, J.
Forman, J. C.


Balfour, A.
Coldrick, W.
Fraser, Thomas (Hamilton)


Bence, C. R. (Dunbartonshire, E.)
Collick, P. H. (Birkenhead)
George, Lady Megan Lloyd (Car'then)


Benson, Sir George
Cronin, J. D.
Gibson, C. W.


Beswick, Frank
Cullen, Mrs. A.
Gordon Walker, Rt. Hon. P. C.


Blyton, W. R.
Darling, George (Hillsborough)
Greenwood, Anthony


Boardman, H.
Davies, Ernest (Enfield, E.)
Grenfell, Rt. Hon. D. R.


Bowden, H. W. (Leicester, S.W.)
Davies, Harold (Leek)
Grey, C. F.


Bowles, F. G.
Davies, Stephen (Merthyr)
Griffiths, David (Rother Valley)


Boyd, T. C.
Deer, G.
Griffiths, Rt. Hon. James (Llanelly)


Braddock, Mrs. Elizabeth
Delargy, H. J.
Hale, Leslie


Brockway, A. F.
Diamond, John
Hall, Rt. Hn. Glenvil (Colne Valley)


Broughton, Dr. A. D. D.
Dodds, N. N.
Hamilton, W. W.


Brown, Thomas (Ince)
Donnelly, D. L.
Hastings, S.


Burke, W. A.
Ede, Rt. Hon. J. C.
Hayman, F. H.


Burton, Miss F. E.
Edwards, Rt. Hon. Ness (Caerphilly)
Henderson, Rt. Hn. A. (Rwly Regis)


Butler, Herbert (Hackney, C.)
Edwards, Robert (Bilston)
Herbison, Miss M.


Butler, Mrs. Joyce (Wood Green)
Edwards, W. J. (Stepney)
Hilton, A. V.







Hobson, C. R. (Keighley)
Moody, A. S.
Smith, Ellis (Stoke, S.)


Holman, P.
Morris, Percy (Swansea, W.)
Sorensen, R. W.


Holmes, Horace
Mort, D. L.
Soskice, Rt. Hon. Sir Frank


Houghton, Douglas
Moss, R.
Spriggs, Leslie


Hoy, J. H.
Moyle, A.
Steele, T.


Hughes, Cledwyn (Anglesey)
Mulley, F. W.
Stones, W. (Consett)


Hunter, A. E.
Neal, Harold (Bolsover)
Strachey, Rt. Hon. J.


Hynd, J. B. (Attercliffe)
Noel-Baker, Francis (Swindon)
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Irving, Sydney (Dartford)
Oliver, G. H.
Swingler, S. T.


Isaacs, Rt. Hon. G. A.
Oram, A. E.
Sylvester, G. 0.


Jay, Rt. Hon. D. P. T.
Oswald, T.
Taylor, Bernard (Mansfield)


Jeger, George (Goole)
Owen, W. J.
Taylor, John (West Lothian)


Jenkins, Roy (Stetchford)
Paling, Rt. Hon. W. (Dearne Valley)
Thomas, Iorwerth (Rhondda, W.)


Jones, J. Idwal (Wrexham)
Palmer, A. M. F.
Thomson, George (Dundee, E.)


Kenyon, C.
Pannell, Charles (Leeds, W.)
Timmons, J.


Key, Rt. Hon. C. W.
Parker, J.
Ungoed-Thomas, Sir Lynn


King, Dr. H. M.
Paton, John
Usborne, H. C.


Lawson, G. M.
Pearson, A.
Viant, S. P.


Lee, Frederick (Newton)
Prentice, R E
Warbey, W. N.


Lee, Miss Jennle (Cannock)
Price, J. T. (Westhoughton)
Watkins, T. E.


Logan, D. G.
Probert, A. R.
Wheeldon, W. E.


Mabon, Dr. J. Dickson
Proctor, W. T.
White, Mrs. Eirene (E. Flint)


McAlister, Mrs. Mary
Pursey, Cmdr. H.
White, Henry (Derbyshire, N.E.)


McCann, J.
Rankin, John
Wilkins, W. A.


MacDermot, Niall
Redhead, E. C.
Willey, Frederick


McInnes, J.
Reid, William
Williams, David (Neath)


McKay, John (Wallsend)
Reynolds, G. W.
Williams, Rt. Hon. T. (Don Valley)


McLeavy, Frank
Robens, Rt. Hon. A.
Williams, W. R. (Openshaw)


MacMillan, M. K. (Western Isles)
Ross, William
Willis, Eustace (Edinburgh, E.)


MacPherson, Malcolm (Stirling)
Silverman, Jullus (Aston)
Woof, R. E.


Mahon, Simon
Silverman, Sydney (Nelson)
Yates, V. (Ladywood)


Mann, Mrs. Jean
Simmons, C. J. (Brierley Hill)



Mayhew, C. P.
Skeffington, A. M.
TELLERS FOR THE NOES:


Mellish, R. J.
Slater, Mrs. H. (Stoke, N.)
Mr. Short and Mr. Poppiewell.


Mitchison, G. R.
Slater, J. (Sedgefield)

Clause ordered to stand part of the Bill.

Clause 26.—(ESTATE DUTY: LIFE INSURANCE POLICIES.)

7.15 p.m.

Mr. Charles Fletcher-Cooke: I beg to move, in page 22, line 30, to leave out from the second "and" to the second "the" in line 31.
I understand, Mr. Blackburn, that it will probably be for the convenience of the Committee if we take with this Amendment a whole group of others that are purely drafting.

The Temporary Chairman: Yes, if that is for the convenience of the Committee.

Mr. Fletcher-Cooke: We are dealing now with a matter on which we must congratulate the Government. It is the long-promised repeal, virtually, of the decision In re Hodge, and that is something for which the Government, in their care that people should not pay too much death duties, is to be much commended. The principle adopted is right in equity. It is that if the deceased had no interest or enjoyment in the life policy, his estate should not bear duty, except in so far as the premiums that he has been paying during the last five years before his death must be treated

as gifts, under the usual rules relating to gifts.
That is provided for in subsection (2) of this Clause, and is obviously right, but this batch of Amendments is designed to cure what I think is an oversight. The draftsmen, when dealing with this very difficult and technical matter, omitted to provide for a state of affairs that is fairly common in which the life policy is not simply assigned to the future beneficiary by the holder, but the same sort of effect is achieved by means of settlement and through the interposition of trustees.
I shall not weary the Committee by going through the innumerable subsections and passages in which I and my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) have sought to rectify this ommission. All I will say, and I hope that at this stage it will be enough, is that these Amendments are designed to bring into conformity with Government policy the very frequent cases where the deceased had not merely assigned the benefit in the life policy to someone directly, but had done so to trustees in trust for beneficiaries.

The Solicitor-General: We are grateful to my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke). I think he is quite right. This


Clause, in subsections (2) and (3), deals with the matter on a basis of policies assigned to a person—someone called the donee—and it is quite right that in many cases where the donor settles the policy on trust the donee will, in fact, be a trustee.
The pattern that we have at present would have one particularly unfortunate result. It is noted somewhere in this batch of Amendments that subsection (4, b) of the Clause as it stands would come into operation after the trustees resigned or fresh trustees were appointed, which is not the desired result in the context.
I confess that I should like to have time to consider the precise Amendments which are most desirable to attain the result that everybody would want, and if that course were acceptable to my hon. and learned Friend and to the Committee I wonder whether he would think it right, on my undertaking on behalf of the Government between now and Report to consider exactly what form of Amendment would be appropriate, to withdraw his Amendment and not to press the others which are under consideration.

Mr. Fletcher-Cooke: I am very grateful to my right hon. and learned Friend. Although a certain amount of drafting work has been done by myself and others, nevertheless we do not purport to have quite the expertise which is available to my right hon. and learned Friend. I therefore beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. David Price: I beg to move, in page 22, line 40, at the end to insert:
This subsection shall not apply to any policies taken out under the Married Women's Property Act, 1882, or the Married Women's Policies of Assurance (Scotland) Act, 1880.
We are very pleased that the Government have introduced this Clause to rectify the injustice in what is known as the Hodge case in another place, but we have considerable doubts whether this may not cut across the Married Women's Property Act, 1882, and the similar Scottish Act of 1880. I refer to Section 11 of the 1882 Act.
We have considerable difficulty in understanding lines 35 to 40 of Clause 26. I think I know what formula the Government are trying to legislate for, but I cannot put any mathematical interpretation on the words which appear in the Bill, and I hope that my right hon. and learned Friend will take this opportunity to explain exactly what is meant by those words. I have consulted one or two of my hon. and learned Friends who said that they once knew what they meant, but at the time of asking they were unable to tell me in simple English what they meant.
I hope that my right hon. and learned Friend will regard this Amendment as being exploratory, both on the interpretation of the exact formula provided and also on this doubt, namely, that we are advised by some learned opinion outside the Committee that this Clause as drafted may militate against the Married Women's Property Act, 1882, which I am sure it is not the intention of my right hon. and learned Friend to interfere with.

Mr. Frederick Mulley: This point has also exercised us on this side of the Committee. I knew that the hon. Member for Eastleigh (Mr. D. Price) was a man of many parts and that, among other things, he was an economist and scientist, but I think we can now welcome him among the ranks of those who try to understand the legal niceties of Estate Duty. I am sure that in this new venture he will be as successful as in those other fields.
I am sure that many of us share the hon. Member's difficulties about the wording of the Clause in general and subsection (2) in particular, but I think perhaps these points might be better considered with the Clause as a whole. I should be grateful if the Solicitor-General would clear up this point about Section 11 of the Married Women's Property Act. My own view is that it is already covered by the Clause, but the obscurity of the Clause is such that I think there are grounds for real doubt in the matter, and I shall be glad if the right hon. and learned Gentleman will deal with this point and let us know how we stand under that Act.

The Solicitor-General: I will do my best. If I rightly understand my hon.


Friend's difficulties, there is apparently a point of anxiety—we believe it to be misconceived—as to whether subsection (2) of the Clause will do something to Married Women's Property Act policies which it is in no sense intended to do. That is to say, it would interfere in some way with the present operation of the rules about aggregation in relation to those policies because they are specially privileged.
If that is the point which my hon. Friend has in mind in relation to Married Women's Property Act policies, I will give him an unhesitating answer that the subsection is designed not to interfere with the present operation of the rules of aggregation in that respect, and in our belief it does not.
If any hon. Member were anxious to urge reasons to the contrary we should listen with the greatest interest, not claiming any absolute infallibility, but unless the Committee desires it, I do not think I would at the moment state the reasons why we say that the subsection as drafted leaves the principles of aggregation applicable to that type of policy as they are now.
I do not know exactly what is my hon. Friend's point about Section 11 of the Married Women's Property Act, so that if I do not meet it straight and answer it properly I hope he will elaborate it. I do not know whether the hon. Member for Sheffield, Park (Mr. Mulley) can assist me.

Mr. Mulley: The point which concerns me, although I accept the Solicitor-General's view that Section 11 is not affected by this provision, is that under Section 11 as soon as a policy was taken out for the benefit of a wife and children it automatically vested in the beneficiaries, whether or not any premiums had been paid.
I think that the purpose of subsection (2) of this Clause is to deal with the other problem of the Hodge case where only the proportion of premiums which had been paid outside the five-year period would receive the benefit of this Clause. It is a proportional benefit in accordance with the way in which the premiums have been paid. As I understand, Section 11 of the Married Women's Property Act is affected, and it may be a matter of

doubt as to whether the whole or part of Married Women's Property Act policies are covered. I think that is the point which was put to me as being a difficulty.

7.30 p.m.

The Solicitor-General: I am obliged to the hon. Member for Sheffield, Park (Mr. Mulley). I understand the point, if that creates difficulty, but it is not really a danger. As the hon. Member said, the effect of taking out in the ordinary fashion a Married Women's Property Act policy and nominating a beneficiary is to create a trust in the beneficiary forthwith, so that it is at that moment of time when the policy is effected that the benefit is taken by the beneficiary.
What the Clause will do to that class of policy, in conjunction with other classes of policy, is to repeal the old provisions which were special to policies of insurance and did not relate to gifts of other kinds of property, and reduce the duty payable in respect of them, in effect, because, whereas in the past, while Section 11 of the Customs and Inland Revenue Act, 1889, was the governing factor, the duty would have been on the whole of the policy moneys provided, as it were, by premiums paid by the deceased, whenever he paid them, however long ago he paid them—as that calculation would be in relation to the case of Hodge—under subsection (2), the only payments of premium which will play a part in a gift in the case we have in mind are premiums paid by the deceased within the five years before his death.
I was asked for an explanation of the way in which the latter part of subsection (2) works. I think that we have become familiar in the House with the concept of what are called bricks in relation to pensions or the like. This is very like that concept of a brick. If the deceased pays a premium on the policy which he has given during the last five years of his life, each payment confers on the beneficiary an improved policy, and it is that idea which is expressed in the words
the payment shall be treated as a gift to the donee of rights"—
one might say improved rights—
under the policy".
When one comes to deal with each brick of improvement created by the


payment of the premium within five years of the death, one values it at a value equal to the proportion of the value of the policy which the amount of the premium paid by the deceasel at that point bears to the aggregate amount of all the relevant premiums. The answer to the question, What are the relevant premiums? is found in subsection (5), namely, in the ordinary case—I need not complicate it—the whole lot paid up to the maturity of the policy. It is merely the concept of the brick each time matching the appropriate proportion of the policy.
I am full of words in my endeavours to explain. If I have failed my hon. and learned Friend or any other hon. Member, I shall be glad to try again. Otherwise, I shall keep quiet now.

Mr. D. Price: In view of my right hon. and learned Friend's reply, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Fletcher-Cooke: I beg to move, in page 23, line 12, at the end to insert:
Provided that if the benefits or any of them are receivable at a time before the death the value shall be taken to be or to include (as the case may be) the value of those benefits at the time when they are receivable.
The point of this Amendment is a very small one. It is designed to insert into this scheme what one might call the modern view of the date of valuation for the purposes of the notional gift. Throughout the Clause, the premiums and certain other things are to be treated as a gift, in the rather elaborate way that my right hon. and learned Friend explained—I do not mean that his explanation was elaborate but that the matter itself is elaborate—and we understand from that and from our reading of the Clause that one has to deem and calculate certain matters as gifts.
Subsection (4, a) provides that the valuation shall take place as at the death. My Amendment is intended to import into this little code dealing with these policies the sort of consideration which we discussed in 1957 in connection with the "disappearing horse" provisions in the Act of that year. I think that the matter can be best and most vividly brought to the memory of the Committee in that way. The Amend-

ment is designed to insert words by which the benefits receivable before death are to be valued, if possible, at the date of receipt rather than at the date of the death.
This works both ways, of course; it is not necessarily for the benefit of the taxpayer. The method of valuation at death rather than at the date for receipt very often works against the Exchequer, particularly if the taxpayer or potential taxpayer is cunningly advised upon the sort of asset that the settlement should buy. As we remember, one can buy disappearing assets which have no value at the date of the death.
In conformity with what is now Section 38 of the Finance Act, 1957, which dealt with that difficulty on the wider and more general matter of gifts, I have sought to insert here, as it were, a formula to apply that principle in that Section of the 1957 Act to this more limited class of gifts under these life policy transfers and settlements.
I hope I have said enough to make clear the object of the Amendment. As I say, it is only applying a policy which the House adopted in 1957 to the provisions in regard to these somewhat notional gifts which we hope to pass in 1959.

The Solicitor-General: I am very grateful to my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) for the short and succinct way in which he stated the point raised by the Amendment. It is, I suppose, concerned only with endowment policies. They would have to mature in the lifetime of the assured for the point to be of importance.
Frankly, we feel some doubt about whether my hon. and learned Friend's idea is right. The general rule, the modern general rule, is that for Estate Duty purposes one values at the date of the death when dealing with gifts inter vivos. To depart from it in this context would, so it seems to us, be very harsh on the taxpayer in certain instances which might arise.
The general rule is modified, it is true, by Section 38 of the 1957 Act, with its "disappearing horses", and so forth, but essentially in matters where the donee has disposed of the gift before the death, the exact principle is followed


in paragraph (b) of subsection (4) of the Clause. In other words, the Clause adopts that principle in that particular case. But, apart from the case where the donee has disposed of the gift before the death of the donor, it is most dangerous, I suggest to the Committee, to adopt this suggestion.
The point is very often—one would think, in most cases—immaterial, because the policy provides for a sterling cash payment, and the nominal value of the sterling cash payment, subject to inflationary tendencies, buying power and so forth, would be the same both at maturity and at the death of the assured.
But suppose that the policy provided for a benefit other than cash—perhaps a stated amount of Government securities or an annuity. It would then seem right to follow the general rule and to value at the death, because the annuity at the time of maturity would be considerably more valuable in some cases than at the time of the death, and it would be harsh as against the donee not to value at the death at a time when the annuity may be considerably less in value than it was at the time of the maturity of the policy.
It is for that reason that we believe that the Clause as it stands proceeds on the right principles of valuation, and I should therefore feel obliged to ask the Committee not to accept the Amendment.

Mr. Fletcher-Cooke: I bow to the superior wisdom of my right hon. and learned Friend when he says that on the whole he thinks that the Clause as drafted would be of greater benefit to the taxpayer than it would be with my Amendment. As I have said, it was not entirely with an eye on the taxpayer that I introduced the Amendment, because I think that in moving these rather technical Amendments one should have regard to the general, logical and consistent position rather than always try to squeeze something out of the Exchequer.
I shall ask leave to withdraw the Amendment, but I would ask my right hon. and learned Friend to look again at the possibility of a certain amount of undesirable dodging which could arise in the case that he mentioned, namely, a policy that provided not for a cash payment nor even for an annuity but for a Government bond—for example, a Victory Bond. It may be possible so to arrange the maturity of a policy, given

luck with one's dates, that that bond had disappeared or at any rate had changed its nature to such an extent that the taxpayer got away with it in the way that the disappearing or dying horse taxpayer used to get away with an uncovenanted benefit in the sense of an undeserved benefit. However, I do not want to argue that case further. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The Solicitor-General: I beg to move, in page 23, line 45, after "gift)" to insert:
except subsection (11) (which provides for marginal relief in the case of gifts exceeding five hundred pounds)".
Subsection (7) excludes Section 38 of the Finance Act, 1957, because in that Section we provided for the valuation of gifts in certain circumstances, namely, where the donee had parted with the gift before the death. This Clause adapts the principle of Section 38 to the topic of this Clause, namely, insurance policies. It was not desired to risk a conflict between the two sets of provisions and therefore, this Clause cut out the operation of Section 38 in relation to its own subject matter. However, that was rather too violent a surgical excision because one of the subsections of Section 38 conferred certain marginal relief in relation to certain small gifts—those just exceeding £500. It was not desired to exclude the marginal relief provision. For that reason we propose to cut down what we previously cut out by subtracting from the exclusion subsection (11) of the Section referred to.

Amendment agreed to.

7.45 p.m.

Mr. Fletcher-Cooke: I beg to move, in page 23, line 46, at the end to insert:
(8) Where a policy of life assurance is at the time of a death comprised in a settlement whereunder the deceased or any other person had an interest ceasing on the death, the policy shall not by reason of such interest be taken to pass on the death under section one of the Finance Act, 1894, or be deemed to be included in the property so passing by virtue either of paragraph (b) of subsection (1) of section two of that Act or of paragraph (c) of subsection (2) of section thirty-eight of the Customs and Inland Revenue Act, 1881.
Would it be convenient also to take the Amendment in page 23, line 46, at the end to insert:
(8) Where the last foregoing subsection has effect, any premium under the policy paid


by the trustees of the settlement out of income to which, or out of property to any income of which, the deceased would, but for such payment, have been entitled shall be deemed to have been paid by the deceased by way of gift.

The Temporary Chairman (Major Sir William Anstruther-Gray): That would be convenient.

Mr. Fletcher-Cooke: These Amendments will take a little longer than my other Amendments because the point is extremely difficult.
Hon. Members will know that under the Finance Act, 1894, duty is exigible either under Section 1—that is, property passing at the death—or under Section 2, subsections (a), (b), (c) or (d)—that is property deemed to pass. Tax that is exigible under one or other of those Sections cannot be exigible under both. In two recent cases in the House of Lords, one known as the Wrightson case and the other the Barber case, a settlement of the following type was considered. I shall simplify the facts considerably in both cases. A settlor—let us call him A—settled a life policy on his life and its proceeds on B for life with remainders over to C and D. In those circumstances, the House of Lords had to consider whether, on the death of A before B, any Estate Duty was leviable.
It was said that on the death of A, even though he had had no enjoyment from the policy personally and had had no intention of having and indeed could not have had any enjoyment, nevertheless the property must be deemed to pass on his death under Section 2 because the nature of the interest of B might be said to have changed at the moment that A died. There was a conflict of judicial opinion, but nevertheless it was held that no death duty was leviable because B already had an interest in possession while A was alive and, therefore, it could not be deemed to pass because B already had sufficient interest in possession, and when the dread event occurred it did not work a sufficient change in the nature of his interest to cause the taxman to come upon him.
That appears to be very splendid from the point of view of the taxpayer and hon. Members may wonder why I am

quarrelling with it, but the reason why the House of Lords held that no Estate Duty was payable was, as I have said, that B's interest was already in possession. Let us vary the facts a little and see what would have happened if B had died before A. If during A's lifetime B dies, B has already an interest in possession because the House of Lords has said so. That means that on B's death, even though he had no enjoyment of that policy which did not mature until A died and the interest which he has in possession passing to C and D, nevertheless his estate would, by the very reasoning that excused him if he survived A, have to attract duty if he died first.
This was a result contemplated with horror by the Master of the Rolls in the case in the Court of Appeal, when he said that it was against all reason but nevertheless the arguments of counsel drove him to accept it. I hope I have said enough to show that in such a case—and there are many others; I have simplified the matter as much as I can—the very finding of the House of Lords would make it inevitable that there would not be a deemed passing under Section 2 but an actual passing under Section 1 of the 1894 Act and that tax would be leviable on the estate of B even though B never had any enjoyment whatever from that interest. That conflicts very much with the principle that has run through the Clause that death duties are not to be levied on the estates of people who have had no enjoyment from that interest except in so far as the five-year gift principle is an exception.
It may be said that in the case to which I have referred, there would be exemption under Section 5 (3) as subsequently amended, which states that
In the case of settled property, where the interest of any person under the settlement fails or determines by reason of his death before it becomes an interest in possession, and subsequent limitations under the settlement continue to subsist, the property shall not be deemed to pass on his death by reason only of the failure or determination of that interest.
That would not avail the taxpayer in this case, because, by the very nature of the House of Lords finding, B's interest is an interest in possession and it is not by reason of his death that it becomes


one. Therefore, his executors and his estate would have to pay even though he had never had any enjoyment of that policy because he died before it matured. That is contrary to the generous spirit of the Clause.
If other examples are wanted by the Committee, I could give them. It would, however, trespass too much on the kind attention of hon. Members if I were to do so, because this is a matter which can be dealt with only by intensive quotations from the speeches of their Lordships in the Wrightson and Barber cases, and I am sure that nobody wants that.

The Solicitor-General: I sympathise greatly with my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke). I do not want to read anything from their Lordships, but I do not know how to deal with the two Amendments within any reasonable, sensible compass of time available to the Committee. Perhaps I might say by way of preface that we would like an opportunity to consider with great care everything that my hon. and learned Friend has said and to see whether anything which he has been saying could cause us in some way to change our present frame of mind that his Amendments would produce some strange results—I will explain them presently—and that in any event they are quite outside anything that the Clause is designed to do.
The Committee will appreciate that the whole operation of the Clause is designed to prevent gifts of policies of insurance being treated as they have been more harshly in relation to Estate Duty than gifts of other kinds of property. My hon. and learned Friend's Amendments would create a specially privileged position for gifts of policies of life assurance, making them more privileged than gifts of other kinds of property. It is not our intention in the Clause to seek to do anything of the kind, nor is it easy to understand why policies of insurance, if given, should be specially privileged more than gifts of other kinds of property.
The first of the two Amendments would exempt life interests in settled policies of assurance from Estate Duty under the three heads of claim named in the Amendment. Every one of those

heads of claim is based on an enactment which relates not only to assurance policies, but to other forms of property too. My hon. and learned Friend's second Amendment would substitute a more limited claim to duy under the gifts inter vivos provision for the existing claim to duty. The Amendments would operate widely, because they would relate to policies which are settled on the deceased for life or on somebody else for the life of the deceased and would not even operate only on policies of the life of the deceased. They would apply also to policies on the life of another.
I do not know how to tackle this problem shortly. I must cite two specimen examples and resort, as usual, to those good companions A, B and C. For this purpose, however, one must have a sample of a settlement which creates a life interest for the settlor in a policy and one must have an instance where the settlement creates a life interest in another person and see how it works out. We believe that my hon. and learned Friend's Amendment would produce a wholly wrong result as to the first one and a very odd result with regard to the second one; but I need to explain it a little more elaborately.
This is my first specimen. The settlor is always A, the person with the life interest is B and the ultimate beneficiary is C. Suppose that A settles property, including policies of insurance, on his own life and on the life of his wife, B, on trust for himself for life and after his death to C absolutely. One needs, of course, the provision that premiums are to be paid out of the income or capital of the other property in the settlement.

Mr. Mitchison: May I make a suggestion to the right hon. and learned Gentleman? Does he insist on a knockout or would he not be satisfied with a win on points?

The Solicitor-General: I hate this as much as the hon. and learned Member does, if not even more. It is, however, a slight relief from the kind of cause célèbre which gets into the Press. Otherwise, Estate Duty is a slightly morbid topic. The trouble is that I am not certain whether I am addressing myself only to this Committee and I do not know how to abbreviate what I have to say in relation to matters outside. I


will go along as swiftly as may be with the indulgence of the Committee, well understanding what agony it causes to my fellow Members in this place.
On the basis of the case I was putting, when A dies in the lifetime of B, duty at present would be on property passing to C on the death which includes the policies and, therefore, would be on the policy moneys payable on A's death and the surrender value of the policy on the life of B. In that case, the first of my hon. and learned Friend's two Amendments would exempt the policies, but not the other property settled, from a claim under Section 1 of the 1894 Act. It would substitute a claim for duty on the basis that the premiums were gifts from A to C.
Clearly, that is unhappy in its result, because it would mean that every policy ordinarily would be wholly exempt from duty. I say that because the gifts and premiums in any ordinary case would be wholly exempted by reason of their being gifts which are normal and reasonable under the terms of the Statute. I do not believe that is the result which my hon. Friend wants, and it is the result which his Amendment would have.
8.0 p.m.
My second specimen, and it is not a long one to describe, is the reverse one, where the settlor settles policies on his life in trust on someone else for life. It is for instance, where A by his marriage settlement settles property, including policies on his life, in trust for his wife B for life and on her death for C absolutely. Once again I want the premiums OP the policies paid out of the income from the capital of the property settled.
I do not want to trouble the Committee in the least with quotations from their Lordships in the Wrightson case or the like, but the result we get there is that if on A's death during the lifetime of B, on the basis of the decision in the Wrightson case, there is to be no claim under Section 2 (1, d) of the Act because B's beneficial interest arose during A's lifetime and not on his death, then the corollary would be that B's beneficial interest arose during A's lifetime and there would be a claim where B dies during the lifetime of A.
Clearly, if we are going to have the kind of Amendment in that case which my hon. and learned Friend has selected, the first of these Amendments to exempt

the policy from duty on the death of B during the lifetime of A, it would be only right to be consistent to have a parallel Amendment to Section 2 (1, d) in favour of the Revenue restoring a claim for duty on A's death during the lifetime of B. It is arguable whether one or the other is the right way about it, but it must be consistent. That is the view we take. On the other hand, in the case I am putting, his Amendment produces the absurd result of treating the claim on the death of B as one on the basis of a gift from B, the life tenant, to C, which is manifestly nonsense, with respect, because what is given is given by the settlor, not by the life tenant.
I am sorry to be so long and wholly inexplicable about it, but it is the nature of a subject matter which renders that necessary. It is for those reasons that I would submit to my hon. and learned Friend that the proposals in his Amendments would not really work satisfactorily, and the general idea raised by these Amendments is wholly outside the purpose of the Clause. It is for that reason that I could not advise the Committee to accept them.

Mr. Fletcher-Cooke: My right hon. and learned Friend has been much more severe with me on this than on the other Amendments, and if I ask leave to withdraw it, it will be only on the same basis of the others, namely, that I should like to study, in the quiet of one's closet, the examples he has given of the absurd results of the words which I have sought to put in. I have no doubt that they are very inadequate words, but, at the same time, I think it is fair to say, judging from his reply, that maybe his advisers did not really consider the matter, perhaps because they had not the opportunity.
I return to the point I made when I moved the Amendment, and the examples he has given, particularly his second example. What is the result of the Wrightson judgment when B dies before A? Is it not, as I have said, that that means that although B has never had any enjoyment, tax will he leviable on B's estate because, says the House of Lords, B has an interest in possession, and if B does have an interest in possession it must pass, under Section 1 of the Finance Act, 1894?
I am sure that my right hon. and learned Friend and his advisers will consider that before the next stage. I will certainly undertake to consider the examples he has given and which we can read in HANSARD tomorrow, because I have no pride of authorship in these words, and it may be that they go far too wide, and that other words can be found to deal with the sort of hardship which I foresaw and which, I am sure he will agree, should not be allowed to occur and should be prevented. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Mulley: In view of the hour, I shall not detain the Committee for more than a few moments, but I think that it would be very agreeable of the Solicitor-General would tell us what is actually in the Clause, instead of telling us, as he has been obliged to do so far, what is not in it and what is not intended. I think that all of us will agree that the purpose of the Clause is one deserving of support, to reverse, as I understand it, the decision in the Hodge case and to place gifts of insurance policies on the same footing as gifts of other sorts of assets.
It is, as the right hon. and learned Gentleman has already said, a very complicated Clause, and I am wondering whether the drafting of so long a Clause to achieve what seems so simple a purpose may not cause various possibilities and loopholes to occur. I should certainly like an assurance from him that he will look very carefully at the point made by the hon. and learned Gentleman the Member for Darwen (Mr. Fletcher-Cooke), the possibility that a new form of disappearing horse trick may appear by the use of endowment policies in returns other than cash, and that the difficulty which we thought we had completely disposed of in the Finance Act, 1957, may occur.
Certainly, I was sufficiently impressed by the hon. and learned Member's argument to feel that it justifies some serious study by the Department before the next stage of the Bill. One appreciates the very great difficulty and complexity of these matters, but I think that there is some internal evidence that the Clause

has perhaps been drafted rather quickly. The Chancellor himself has been obliged to rectify one error of drafting, and the Solicitor-General has also been good enough to undertake to meet the very substantial point which was raised by other Amendments, and to produce Amendments at the next stage.
So I should like from him, before we part from this Clause, the assurance that it does no more than put right the Hodge decision. Perhaps he can tell us briefly, exactly and simply what it is intended to do. In particular, I should like him to try to explain to me, if he will, what is meant by subsection (2). The words I find particularly difficult are:
Where by way of gift a person pays a premium under a policy of assurance on his life in circumstances where the payment does not fall to be treated for estate duty purposes both as a gift and as one of money".
I must confess that I have tried to discover what is meant by the words
both as a gift and as one of money",
but so far the meaning has escaped me.
I should be glad if the right hon. and learned Gentleman would deal with that matter. In general, as he has had so much to say on things which are not in the Clause, I should like a precise explanation of what the Clause does, so that we may be assured that the possibilities of loopholes will not arise in future, as suggested from the other side of the Committee.

Major W. Hicks Beach: I want to be extremely brief, because it is quite apparent that the intention of this Clause is welcome to both sides of the Committee, the intention to overcome the gross injustice of the decision in re Hodge, but I still have a rather uneasy feeling that this Clause is rather loosely drafted, if I may say so. I hope very much, since we all agree with its intention, that my right hon. and learned Friend and his advisers will, before Report, take very careful note of the observations which have been made concerning the Clause. We welcome the principle, which must be fair to the taxpayer, and I would conclude by saying to my right hon. and learned Friend, that the Treasury draftsmen are not always right.

Mr. Fletcher-Cooke: I simply want to put a query concerning annuities, which I should be grateful if my right hon. and learned Friend the Solicitor-


General would answer. My right hon. Friend the Chancellor of the Exchequer, in his Budget speech, said that the Finance Bill would include a Clause
the broad effect of which will be that gifted policies of insurance will be treated just like gifts of other kinds of property for Estate Duty purposes. This will apply both to life assurance policies and to policies providing annuities."—[OFFICIAL REPORT, 7th April, 1959; Vol. 603, c. 51–2]
As I understand, Clause 26 (1) deals with the annuities which might fall into charge originally under the Customs and Inland Revenue Act, 1889, and which is now mentioned in Section 2 (1, c) of the Finance Act, 1894. There is also the possibility, and indeed the probability, of a charge on annuity under subsection (1, d) of the same Section. Indeed, it mentioned it, and there is the case of Adamson and others in 1934 where the charge was levied under paragraph (d). I should like to be assured that the desire to treat annuities as not being subject to charge, except for the usual gift which we have been discussing, really is comprehensive and there can be no danger that after we have parted with the Clause the Revenue will seek, under Section 2 (1, d) of the 1894 Act, to charge on an annuity which can no longer be charged under paragraph (c).

The Solicitor-General: On the last point he made, my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) will appreciate that nothing is sought to be done in this Clause about those provisions of statutes which deal with property, other than policies of insurance, in addition to policies of insurance. All we have sought to do is to get rid of those special provisions which cause gifts of policies of insurance, among gifts inter vivos, to be specially harshly treated. This provision relates to the type of claim that arises under Section 2 (1, c). I hope that that is the right answer to the question which my hon. and learned Friend has been immediately asking me. I must try, in more general terms and as succinctly as possible, to give an explanation of the Clause itself, in response to the invitation of the hon. Member for Sheffield, Park (Mr. Mulley).
The idea of course, is to repeal those provisions of the relevant statutes which treat policies more harshly than other objects of gifts and to apply to policies of insurance the ordinary inter vivos gift

Rules—that is, the policies on the life of the donor—just as any other gift inter vivos stands to be treated. We do not find in the Clause what the rules about gifts inter vivos are, but the method adopted is to strike out provisions which are special to insurance policies and to set the right rules for defining and valuing a gift thereafter. That is the way the Clause works.
Subsection (1) repeals the provisions which are special to policies, and the provision in the Finance Act, 1948, which simply related to a manner in which the charge might be evaded, and will not be necessary now that Section 11 of the Customs and Inland Revenue Act. 1889, has gone. The point which the hon. Member for Sheffield, Park was asking about, on subsection (2), is this. There are two different cases to be considered. There is the case where the policy is effected by someone other than the donor, say the beneficiary, and the contractual obligation to pay the premium on the policy is on the person who took it out, but the deceased pays that premium. What he does is to relieve the beneficiary of the contractual obligation to pay. That is already, in Estate Duty law on established cases, a case of a gift of money. No new provision is required in this context because the existing law already provides for it in the right way.
8.15 p.m.
"By way of gift," a person pays a premium which falls to be treated both "as a gift and as one of money" under existing law. In that case, because we do not want a new provision, that is expressly excluded from the operation of the Clause by the words which the hon. Member for Sheffield, Park mentioned. It is necessary to make a new rule where the contractual obligation to pay a premium is on the deceased—he is the person in contractual relation with the insurance company—by reason of the actual words in the old Section. The charge was on property "taken" under a voluntary disposition, and so on, and there is no means of identifying for Revenue purposes the property "taken" when an improved policy is given by payment of further premium after the policy has been assigned or given. That is why we must have a new provision in the second part of subsection (2).
Subsection (3) is only designed to ensure that the right proportion of policy is taken in cases where property passes on assignment for the purposes of section 2 (1, c) of the 1894 Act. Subsection (4) is only to provide for the appropriate valuation, and I do not think that requires any special explanation Subsection (5) is the machinery to get the proportion right in each case by reference to the right lot of relevant premiums, and subsection (6) is to help with certain exemption provisions.
The Committee will remember that there ate exemption provisions which confer an option as to gifts totalling £500 in the case of any particular donee or when a gift is one of an interest in settled property of £100. It may, in certain circumstances, be valued, at the option of the taxpayer, either on the date the gift was made or on the date of the death. The enactment in subsection (6) is to produce the right result in relation to those cases of gift or assignment. I hope that indicates broadly the principle on which the Clause works, that it has manifested the right result to aim at and that we have largely attained it.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 27.—(EXCHEQUER ADVANCES TO NATIONALISED INDUSTRIES AND UNDERTAKINGS.)

Mr. H. Wilson: I beg to move, in page 24, line 10, to leave out from the second "and" to the end of the Clause and to add:
the words 'and no such advance shall be made after the end of March, nineteen hundred and fifty-nine' shall no longer have effect".
The purpose of the Amendment is to make permanent, and not merely confine to one year, the provision introduced in the Finance Act, 1956, that borrowing by a nationalised industry should become a Treasury responsibility rather than be done by the boards themselves on the open market.
I do not want to repeat all the arguments we had in the 1956 debate. It will be recalled by those hon. Members then present that the debate began at 3 o'clock in the morning and continued until well after six o'clock. There was a

Tory back bench revolt. It was an extremely virulent one, though not pursued into the Division Lobbies. In the course of the debate, the then Chancellor of the Exchequer, the present Prime Minister, gave what seemed to me, and I am sure to all except the Tory rebels, very cogent reasons why it was right for him to introduce the measure which we were then debating. He did, however, put a limit of two years on that provision. Some of his Conservative critics were opposed to the whole thing root and branch. They used it as a means of making an attack on the nationalised industries, but obviously it became necessary at the end of the two years for the then Chancellor, who is now the present Prime Minister, to decide what should be done.
Last year, in the Finance Bill, 1958, the present Chancellor rather timidly and with the pussy-footed attitude which he occasionally shows on these matters, decided to continue the Measure for one year only. He now wants in the present Finance Bill to continue it for a year only. We all know the reason. We know that the Chancellor is convinced by arguments which convinced the present Prime Minister, that this is the right way of handling this problem of financing borrowing, but he is too afraid, I think, of the criticism of his own back benchers to have the guts to come here and move a Clause which will give the Treasury permanent powers or at least lasting for some time in the future. Therefore, he carries on for a year at a time until he is finally put out of his misery.
I will briefly remind the Committee of the argument used by the Prime Minister when this proposal was first included in a Finance Bill. Until 1956, the nationalised industries operated direct. They did a lot of borrowing from the joint stock banks, and we all recall how the monthly and three-monthly figures of the joint stock banks at that time were very much distorted by the changes in the level of the overdrafts of State industries, which made it very difficult for the joint stock banks and the City to form some view of what was happening to the general level of bank overdrafts.
On top of that, the nationalised industries were permitted to issue stocks against a Treasury guarantee but with


a sense of timing which, so far as we know was not completely under the control of the Treasury. Referring to that particular arrangement—that is the arrangement which had applied to all nationalised industries except the National Coal Board, which has always been Treasury financed—the then Chancellor said in a speech made with remarkable clarity and lucidity between 5.30 and 6.0 a.m. on that occasion—and I am glad that we are debating this matter tonight at a more reasonable hour—that
There are two great disadvantages in that arrangement,"—
that was the arrangement in force until the 1956 Finance Bill—
particularly in the present circumstances. The first is that, by and large, official support can only he given to these stock issues by borrowing the necessary funds on Treasury Bills. That is the only way in which we can give support to those issues when they are not fully taken up in the market, and the continual issuing of Treasury Bills adds to the liquidity of the banking system, and so often to the difficulties of operating monetary control. That is the first difficulty in the present circumstances.
Then the right hon. Gentleman went on:
The second is that frequent issues of the stock of these boards, which are made by Statute under Treasury guarantee and therefore involve Government credit, have to be made at inconvenient times; not when it would suit the market, but at the particular time when a particular industry has reached the limit of its borrowing powers from the joint stock banks. The fact that they are going on at a time necessary to them, but not suitable for the broad management of Government credit and Government funding, prejudices the general Government programme of borrowing and refinancing and funding.
I ask the Committee to accept the view that since the Exchequer has in present circumstances to bear the burden of providing at least the bulk of the capital finances of these industries, it is better, in the wider interests of the management of Government credit and funding Government debt, that the Exchequer should be in control of the whole operation.
To summarise what the then Chancellor said, he agreed with the words I had used a few minutes earlier when I said that the motive in the Chancellor's mind for making this change was that it made it very difficult for the Treasury to "rig the market", and I went on to say that 1 was using the phrase in the best sense of the word.
The then Chancellor took up that phrase arid thought that it was also

desirable for the Treasury to "rig the market", and he made clear that he was also using that phrase in the best sense of the word. He then summarised the position by saying
There are, therefore, two purposes: first because at present the monetary control is made more difficult because of the method by which we have to support these borrowings, and, second, because the timing of them is inconvenient in the situation in which we are today, but from which we may hope to escape."—[OFFICIAL REPORT, 12th June, 1956; Vol. 554, c. 527–8.]
That was his summary of why it was necessary in 1956.
I ask the Chancellor, does he really feel that the situation is so different now or likely to be so different next year or the year after that it is essential to take up the time of the Committee and of the House with these one-year extensions of the powers granted by the House in 1956?
For example, taking the then Chancellor's perfectly accurate statement that as this involved a lot of borrowing on Treasury bills, official support could be given to stock issues only by borrowing on Treasury bills, does not the Chancellor agree that this is still a problem? Does he not further agree that if there were any question of going back to direct borrowing, to quote the then Chancellor:
… these borrowings have to be made at inconvenient times; not when it would suit the market, but at the particular time when a particular industry has reached the limit of its borrowing powers from the joint stock banks."—[OFFICIAL REPORT, 12th June, 1956; Vol. 554, c. 527–8.]
Is that not just as likely now and likely to be just as essential particularly when we are trying to treat this difficulty both between deflation, unemployment and the prevention of the growth of inflation in the future? Does not the Chancellor agree that it is essential for the Treasury to be able to "rig the market" in the best sense of the word and that the question of timing is of all importance in this matter?
The Prime Minister emphasised in 1956 that the Government were facing some fairly heavy funding operations, and from that point of view also it was essential to have control of the timing of large transfers of borrowing of this kind. Does not the Chancellor agree that he has some very heavy re-financing operations between now and the end of


the present financial year? On top of that, as the Chancellor himself told us, he has a deficit of £720 million in his Budget which has to be financed. Of course, that deficit has been increased since his Budget speech by a number of additional commitments, some of which have been accepted with the support of the whole House, including £30 million for cotton.
8.30 p.m.
Therefore, with this kind of problem continuing from year to year, surely the Chancellor will agree that it is essential to have this control. He told us last year that he wanted the control for a year. Now he tells us he wants it for a year again. He must recognise the problem with which this country will be faced for a long time ahead, namely, that of steering an even course between deflation and inflation. We know that the Chancellor's success in steering an even course is not always as good as he would like it to be. On behalf of this side of the Committee I express our deep sympathy on the fact that the Chancellor found himself on the rocks last Sunday. Perhaps that underlines to him the importance of the oft-repeated warning we have issued in successive economic debates about the need—whether for a motor car, a yacht, or the national economy—of both having a steering mechanism fitted and using it.
The Chancellor has always rejected this argument as regards the national economy and it looked as if he was pursuing the effects of his own philsophy last Sunday and found himself on the rocks. We were sorry, and we are glad to see him safely restored to us, but we do not want to see the national economy on the rocks as a result of not using the steering mechanism with which the economy is, or can be, provided.
It was obviously the view of the then Chancellor that this was an essential part of the steering mechanism. It is obviously equally the view of the present Chancellor. It was so a year ago, and it is so now. This is an essential part of the steering mechanism, but, as I have said in this debate, we fear that the right hon. Gentleman will be stabbed in the back by some of his terrible supporters who kept the then Chancellor out of bed until 6 o'clock in the morning. I am thinking of the noble Lord the Member

for Dorset, South (Viscount Hinchingbrooke), who is not here tonight, and the hon. Member for Kidderminster (Mr. Nabarro), who struck fear and terror into the heart of the then Chancellor. It is clear that the thought of these fearsome supporters caused the Chancellor to put down this Clause in terms of a twelve months' continuance.
If the Chancellor could convince us that he can see any immediate prospect of such a change in the situation that it will not be desirable permanently, or quasi-permanently, as an instrument of Government planning to keep this kind of control, it would not be necessary for me to move this Amendment. I hope the Chancellor will be specific in defending this Clause and will make it plain that he only wants the powers for one year.
If there were any danger that the present Chancellor will be introducing the next Budget, it would be a fair assumption to make that he will be coming along in a year's time for the same powers to be extended for twelve months more. I have just seen the Chancellor turn round uneasily to see if his fearsome friends are behind him. They are not. The chocolate soldier from Kidderminster has not turned up; he did not turn up for the Purchase Tax debate. The noble Lord the Member for Dorset, South, is not here. In fact, if I sit down quickly and if the Chancellor will get up quickly, he might accept my Amendment quickly and relieve himself of any more stabs in the back for all time, or at any rate for as long as he is Chancellor of the Exchequer.

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): I have not a great deal to complain of in the right hon. Gentleman's description of the situation and of the fairly narrow difference between us. If it is not out of order, I would like to thank him for his reference to my week-end exploit in investigating the bed of the sea. I think it is known in scientific circles as oceanography. As regards running on the rocks, I have always understood that one's recreational activities should be as different as possible from one's daily activities.

Mr. H. Wilson: Then did the right hon. Gentleman do it on purpose?

Mr. Amory: It would be out of order to follow this matter any further, much as I should like to do so.
I will refer to only one other small point male by the right hon. Gentleman when he was referring to the deficit following the Budget of this year. He referred to the new cotton proposal. I would not accept that all the expenditure under that proposal will appear as expenditure this year. Certainly, it will be nothing like the figure he has mentioned.
I agree with what the right hon. Gentleman said about the advantages of our present procedure in present circumstances. I have no doubt that in the present circumstances the position is substantially the same, and the arguments for our present procedure are as strong as they were when my right hon. Friend the Prime Minister first introduced it in 1956. But having said that, and having acknowledged that in present circumstances there is no question that this is the most convenient system, may I say that I do not regard it as perfect and that I should like to find that circumstances permitted us to have arrangements under which the nationalised industries raised their longterm finance on the market without Government guarantee. But that would not be feasible under present circumstances, and I do not know when circumstances will arise in which it would be feasible. I think that the only difference between us is whether these arrangements should be made permanent or whether we should leave them as they are for the present to permit the Committee to return to the subject next year and consider the situation then.
If the general situation then is found to be as it is now, I have little doubt that we should wish to propose that the present arrangements should continue. But at present I am not sure that it would be a sensible thing to establish them on a permanent basis until we can see the future a little more clearly. I do not think that it involves the consumption of a great deal of time on the part of the Committee for this matter to be brought before it. For those reasons, I think that again this year it would be a sensible thing that these powers should be continued for one more year and that the matter should be brought before the Committee again,

and I recommend the Committee not to accept the Amendment.

Mr. H. Wilson: In a characteristically agreeable speech, and with great courtesy, the Chancellor has made my case for me far better than I succeeded in doing myself. He has spoken in favour of the Amendment. He has said that in present circumstances he feels that this is the policy which we ought to follow. He went on to build up a little pipe dream about a siutation in which the nationalised industries could do their own borrowing without Treasury guarantee. But the right hon. Gentleman knows perfectly well that before that point could be reached the nationalised industries would have to be free from Government interference in matters of price policy. Not only the Coal Board but—this is very relevant, and becoming more relevant every day—the British Transport Commission would have to be free to charge rates which would enable it to pay its way. It would also mean the renationalisation of road haulage and other things which would make it possible for a large part of the system to pay its way. It would be out of order for me to pursue these fascinating subjects, but the Chancellor knows that perfectly well. Indeed, he has admitted it in terms, as he will see when he reads HANSARD tomorrow.
The right hon. Gentleman says he cannot see any prospect of that situation arising in the near future. I should not think he expects it to happen next year. I am certain that he does not, and if I am wrong I will give way to him. He does not expect that next year, or perhaps for some little time after that, the nationalised industries will be in a position to borrow in the open market on terms which the Government could accept. It is not making the case for going forward for another year, by which time he hopes to be able to propose something different, if it is not expected that the circumstances will change.
The only argument advanced by the right hon. Gentleman for rejecting this Amendment is that perhaps someone will have thought out something new by that time. Why have not they done it? The Prime Minister certainly did not intend his original proposal to last more than two years without careful thought being given to the subject. I am sure that


careful thought was given to the subject by the Chancellor and his advisers a year ago before he risked incurring the wrath of his hon. Friends from Kidderminster and Dorset, South and other hon. Members—no, his hon. Friends from Kidderminster and Dorset, South are still not in the Chamber and it is absolutely safe for the right hon. Gentleman to accept this Amendment. I do hope that he will.
We may assume that the matter was carefully thought out, and if any alternative proposal could have been worked out, I am sure it would have been by the right hon. Gentleman's extremely competent advisers at the Treasury. But they did not. They did not think of any way. The right hon. Gentleman told us last year that it was only for 12 months. This year they would have thought out an answer, surely, if an answer could have been thought out. Surely it is not beyond the wit of the Economic Secretary to the Treasury to find an answer to this, if there is an answer. If an answer could be found next year, I am sure that the Economic Secretary could have found one this year.
This is going on from year to year. The right hon. Gentleman is doing it, as

I have already stated, from fear of his Tory back benchers. I have held out to him the extremely alluring prospect that those Tory back benchers are not here tonight. The cat's away, the mouse can play. The right hon. Gentleman can accept this Amendment and so relieve himself and his successors of trouble for years to come. I appeal to the right hon. Gentleman to take this chance, which is very much in the interests, I am sure, of the Economic Secretary, who will appreciate this point. It will also be in the interests of the Treasury. We have all agreed that this is the best system in any foreseeable circumstances. I cannot see any reason why the right hon. Gentleman cannot accept it. If his hon. Friends were here, I could see a reason, but they are not.

I hope that the right hon. Gentleman will get up and say that he has been converted, if not by my eloquence at least by his own, and that he will accept the Amendment.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 215, Noes 178.

Division No. 127.]
AYES
[8.41 p.m.


Agnew, Sir Peter
Conant, Maj. Sir Roger
Graham, Sir Fergus


Aitken, W. T.
Cooper-Key, E. M.
Grant, Rt. Hon. W. (Woodside)


Amory, Rt. Hn. Heathcoat (Tiverton)
Cordeaux, Lt.-Col. J. K.
Green, A.


Arbuthnot, John
Corfield, F. V.
Gresham Cooke, R.


Armstrong, C. W.
Craddock, Beresford (Spelthorne)
Grimston, Hon. John (St. Albans)


Ashton, H.
Crosthwaite-Eyre, Col. O. E.
Grimston, Sir Robert (Westbury)


Atkins, H. E.
Crowder, Sir John (Finchley)
Grosvenor, Lt.-Col. R. G.


Baldwin, Sir Archer
Crowder, Petre (Ruislip—Northwood)
Hall, John (Wycombe)


Balniel, Lord
Cunningham, Knox
Harris, Frederic (Croydon, N.W.)


Barlow, sir John
Currie, G. B. H.
Harrison, A. B. C. (Maldon)


Barter, John
Davidson, Viscountess
Harvey, Sir Arthur Vere (Macclesf'd)


Batsford, Brian
D'Avigdor-Coldsmid, Sir Henry
Harvey, John (Walthamstow, E.)


Bell, Philip (Bolton, E.)
Deedes, W. F.
Harvie-Watt, Sir George


Bell, Ronald (Buoks, S.)
de Ferranti, Basil
Hay, John


Bennett, F. M. (Torquay)
Dodds-Parker, A. D.
Heald, Rt. Hon. Sir Lionel


Bennett, Dr. Reginald
Donaldson, Cmdr. C. E. McA.
Heath, Rt. Hon. E. R. G.


Bevins, J. R. (Toxteth)
Doughty, C. J. A.
Henderson, John (Cathcart)


Bidgood, J. C.
du Cann, E. D. L.
Henderson-Stewart, Sir James


Biggs-Davison, J. A.
Duncan, Sir James
Hicks-Beach, Maj. W. W.


Bingham, R. M.
Duthie, W. S.
Hill, Rt. Hon. Charles (Luton)


Birch, Rt. Hon. Nigel
Eden, J. B. (Bournemouth, West)
Hill, Mrs. E. (Wythenshawe)


Bishop, F. P.
Elliott, R.W.(Ne'castle upon Tyne, N.)
Hirst, Geoffrey


Body, R. F.
Errington, Sir Erie
Hobson, John(Warwick &amp; Leam'gt'n)


Bossom, Sir Alfred
Erroll, F. J.
Holland-Martin, C. J.


Bowen, E. R. (Cardigan)
Farey-Jones, F. W.
Holt, A. F.


Boyd-Carpenter, Rt. Hon. J. A.
Fell, A.
Hornby, R. P.


Braine, B. R.
Finlay, Graeme
Horobin, Sir Ian


Braithwaite, Sir Albert(Harrow, W.)
Fisher, Nigel
Horsbrugh, Rt. Hon. Dame Florence


Brewis, John
Fletcher-Cooke. C.
Howard, Gerald (Cambridgeshire)


Brooman-White, R. C.
Freeth, Denzil
Howard, John (Test)


Browns, J. Nixon (Craigton)
Gammans, Lady
Hughes Hallett, Vice-Admiral J.


Bryan, P.
Garner-Evans, E. H.
Hughes-Young, M. H. C.


Burden, F. F. A.
George, J. C. (Pollok)
Hutchison, Michael Clark(E'b'gh, S.)


Butcher, Sir Herbert
Gibson-Watt, D.
Hylton-Foster, Rt. Hon. Sir Harry


Cary, Sir Robert
Glover, D.
Iremonger, T. L.


Chichester-Clark, R.
Glyn, Col. Richard H.
Irvine, Bryant Godman (Rye)


Clarke, Brig. Terence(Portsmth, W.)
Godber, J. B.
Jenkins, Robert (Dulwich)


Cole, Norman
Gower, H. R.
Jennings, J. C. (Burton)




Jennings, Sir Roland (Hallam)
Mott-Radclyffe, Sir Charles
Simon, J. E. S. (Middlesbrough, W.)


Johnson, Dr. Donald (Carlisle)
Nabarro, G. D. N.
Smithers, Peter (Winchester)


Johnson, Eric (Blackley)
Nairn, D. L. S.
Spearman, Sir Alexander


Jones, Rt. Hon. Aubrey (Hall Green)
Nicholls Harmar
Speir, R. M.


Joseph, Sir Keith
Nicholson, Sir Godfrey (Farnham)
Spens, Rt. Hn. Sir P. (Kens'gt n, S.)


Kerr, Sir Hamilton
Noble, Michael (Argyll)
Stanley, Capt. Hon, Richard


Kershaw, J. A.
Oakshott, H. D.
Stevens, Geoffrey


Kirk, P. M.
O'Neill, Hn. Phelim (Co. Antrim, N.)
Steward, Harold (Stockport, S.)


Lambton, Viscount
Osborne, C.
Steward, Sir William (Woolwich, W.)


Leavey, J. A.
Page, R. G.
Stoddart-Scott, Col. Sir Malcolm


Legge-Bourke, Maj. E. A. H.
Panned, N. A. (Kirkdale)
Storey, S.


Legh, Hon. Peter (Petersfield)
Partridge, E.
Stuart, Rt. Hon. James (Moray)


Lindsay, Hon. James (Devon, N.)
Peel, W. J.
Taylor, Sir Charles (Eastbourne)


Linstead, Sir H. N.
Pike, Miss Mervyn
Taylor, William (Bradford, N.)


Lloyd, Maj. Sir Guy (Renfrew, E.)
Pilkington, Capt. R. A.
Temple, John M.


Longden, Gilbert
Pitman, I. J.
Thompson, Kenneth (Walton)


Loveys, Walter H.
Pitt, Miss E. M.
Thornton-Kemsley, Sir Colin


Lucas, Sir Jocelyn (Portsmouth, S.)
Pott, H. P.
Tiley, A. (Bradford, W.)


Lucas-Tooth, Sir Hugh
Powell, J. Enoch
Turton, Rt. Hon. R. H.


Macdonald, Sir Peter
Price, David (Eastleigh)
Tweedsmuir, Lady


McLaughlin, Mrs. P.
Price, Henry (Lewisham, W.)
Vane, W. M. F.


McLean, Neil (Inverness)
Prior-Palmer, Brig. O. L.
Wade, D. W.


MacLeod, John (Ross &amp; Cromarty)
Profumo, J. D.
Wakefield, Edward (Derbyshire, W.)


McMaster, Stanley
Ramsden, J. E.
Wall, Patrick


Macmillan, Maurice (Halifax)
Rawlinson, Peter
Ward, Dame Irene (Tynemouth)


Maddan, Martin
Redmayne, M.
Webbe, Sir H.


Maitland, Hon. Patrick (Lanark)
Remnant, Hon. P
Webster, David


Markham, Major Sir Frank
Renton, D. L. M.
Williams, Paul (Sunderland, S.)


Marlowe, A. A. H.
Ridsdale, J. E.
Williams, R. Dudley (Exeter)


Marples, Rt. Hon. A. E.
Roper, Sir Harold
Wills, Sir Gerald (Bridgwater)


Mathew, R.
Ropner, Col. Sir Leonard
Woollam, John Victor


Mawby, R. L.
Russell, R. S.



Maydon, Lt.-Comdr. S. L. C.
Scott-Miller, Cmdr. R,
TELLERS FOR THE AYES:


Molson, Rt. Hon. Hugh
Sharples, R. C.
Colonel J. H. Harrison and


Morrison, John (Salisbury)
Shepherd, William
Mr. J. E. B. Hill.




NOES


Abse, Leo
Evans, Albert (Islington, S.W.)
Lee, Miss Jennie (Cannock)


Ainsley, J. W.
Finch, H. J. (Bedwellty)
Lindgren, G. S.


Allaun, Frank (Salford, E.)
Fitch, A. E. (Wigan)
Logan, D. G.


Allen, Scholefield (Crewe)
Fletcher, Eric
Mabon, Dr. J. Dickson


Awbery, S. S.
Foot, D. M.
McAlister, Mrs. Mary


Bacon, Miss Alice
Forman, J. C.
McCann, J.


Balfour, A.
Fraser, Thomas (Hamilton)
MacDermot, Niall


Bence, C. R. (Dunbartonshire, E.)
George, Lady Megan Lloyd(Car'then)
McInnes, J.


Benson, Sir George
Gibson, C. W.
McKay, John (Wallsend)


Beswick, Frank
Greenwood, Anthony
MacMillan, M. K. (Western Isles)


Blenkinsop, A.
Grenfell, Rt. Hon. D. R.
Mahon, Simon


Blyton, W. R.
Grey, C. F.
Mallalieu, E. L. (Brigg)


Boardman, H.
Griffiths, David (Rother Valley)
Mann, Mrs. Jean


Bowden, H. W. (Leicester, S.W.)
Griffiths, Rt. Hon. James (Llanelly)
Mayhew, C. P.


Bowles, F. G.
Hale, Leslie
Mitchison, G. R.


Boyd, T. C.
Hall, Rt. Hn. Glenvil (Colne Valley)
Moody, A. S.


Braddock, Mrs. Elizabeth
Hamilton, W. W.
Morris, Percy (Swansea, W.)


Brockway, A. F.
Hannan, w.
Mort, D. L.


Broughton, Dr. A. D. D.
Hastings, s.
Moss, R.


Brown, Thomas (Ince)
Hayman, P. H.
Moyle, A.


Burke, W. A.
Henderson, Rt. Hn. A. (Rwly Regis)
Mulley, F. W.


Burton, Miss F. E.
Herbison, Miss M.
Neal, Harold (Bolsover)


Butler, Herbert (Hackney, C.)
Hilton, A. V.
Oliver, G. H.


Butler, Mrs. Joyce (Wood Green)
Hobson, C. R. (Keighley)
Oram, A. E.


Callaghan, L. J.
Holman, P.
Owen, W. J.


Carmichael, J.
Holmes, Horace
Paget, R. T.


Champion, A. J.
Houghton, Douglas
Paling, Rt. Hon. w. (Dearne Valley)


Chapman, W. D.
Hoy, J. H.
Palmer, A. M. F.


Chetwynd, G. R.
Hughes, Cledwyn (Anglesey)
Pannell, Charles (Leeds, W.)


Clunie, J.
Hughes, Emrys (S. Ayrshire)
Parker, J.


Coldrick, W.
Hunter, A E.
Paton, John


Collick, P. H. (Birkenhead)
Hynd, H. (Accrington)
Popplewell, E.


Cronin, J. D.
Hynd, J. B. (Attercliffe)
Prentice, R. E.


Cullen, Mrs. A.
Irving, Sydney (Dartford)
Price, J. T. (Westhoughton)


Darling, George (Hillsborough)
Isaacs, Rt. Hon. G. A.
Price, Philips (Gloucestershire, W.)


Davies, Ernest (Enfield, E.)
Jay, Rt. Hon. D. P. T.
Probert, A. R.


Davies, Harold (Leek)
Jeger, George (Goole)
Proctor, W. T.


Davies, Stephen (Merthyr)
Jeger, Mrs. Lena (Holbn &amp; St. Pncs, S.)
Pursey, Cmdr, H.


Deer, G.
Jones, Rt. Hon. A. Creech(Wakefield)
Rankin, John


Delargy, H. J.
Jones, Elwyn (W. Ham, S.)
Redhead, E. C.


Diamond, John
Jones, J. Idwal (Wrexham)
Reynolds, G. W.


Dodds, N. N.
Jones, T. w. (Merioneth)
Rhodes, H.


Donnelly, D. L.
Kenyon, C.
Roberts, Albert (Normanton)


Ede, Rt. Hon. J. C.
Key, Rt. Hon. C. W.
Ross, William


Edelman, M.
King, Dr. H. M.
Short, E. W.


Edwards, Rt. Hon. Ness (Caerphilly)
Lawson, G. M.
Silverman, Julius (Aston)


Edwards, Robert (Bilston)
Lee, Frederick (Newton)
Silverman, Sydney (Nelson).







Skeffington, A. M.
Taylor, Bernard (Mansfield)
White, Henry (Derbyshire, N.E.)


Slater, Mrs. H. (Stoke, N.)
Taylor, John (West Lothian)
Wilkins, W. A.


Slater, J. (Sedgefield)
Thomas, Iorwerth (Rhondda, W.)
Willey, Frederick


Smith, Ellis (Stoke, S.)
Thomson, George (Dundee, E.)
Williams, David (Neath)


Sorensen, R. W.
Timmons, J.
Williams, Rev. Llywelyn (Ab'tillery)


Soskice, Rt. Hon. Sir Frank
Ungoed-Thomas, Sir Lynn
Williams, Rt. Hon. T. (Don Valley)


Spriggs, Leslie
Usborne, H. C.
Williams, W. R. (Openshaw)


Steele, T.
Viant, S. P.
Willis, Eustace, (Edinburgh, E.)


Stones, W. (Consett)
Warbey, W. N.
Wilson, Rt. Hon. Harold (Huyton)


Strachey, Rt. Hon. J.
Watkins, T. E.
Woof, R. E.


Stross, Dr. Barnett(Stoke-on-Trent, C.)
Weitzman, D.
Yates, V. (Ladywood)


Swingler, S. T.
Wheeldon, W. E.



Sylvester, G. O.
White, Mrs. Eirene (E. Flint)
TELLERS FOR THE NOES:




Mr. Pearson and Mr. Simmons.

Clause ordered to stand part of the Bill.

Clause 28 ordered to stand part of the Bill.

New Clause.—(ESTATE DUTY: AMENDMENTS AS TO EXCLUSION OF DONOR, OR OWNER OF AN INTEREST, FROM POSSESSION OR BENEFIT.)

(1) In the case of persons dying after the coming into operation of this section, any provision of the enactments relating to estate duty which imposes, in connection with a gift of property, or the disposition or determination of an interest in Property, a condition that property shall have been possessed or enjoyed by a person to the entire exclusion of another person or of any benefit to him by contract or otherwise shall be applied in accordance with the following provisions of this section.

(2) In the case of property being an interest in land, or being chattels, retention or assumption by the said other person of actual occupation of the land, or actual possession of the chattels, shall be disregarded if for full consideration in money or money's worth.

(3) In the case of a gift, a benefit which the said other person obtained by virtue of any associated operations (as defined by section fifty-nine of the Finance Act, 1940) of which the gift is one shall be treated as a benefit to him by contract or otherwise.

(4) This section shall be construed as one with Part I of the Finance Act. 1894.

(5) In the application of this section to Scotland, for references to chattels there shall be substituted references to corporeal moveables.—[The Solicitor-General.]

Brought up, and read the First time.

The Solicitor-General: I beg to move, That the Clause be read a Second time.
I am sorry to have to inflict upon the Committee a further dose of Estate Duty topic, but it is not long. Had it not been for a decision in the Judicial Committee of the Privy Council in an Australian case, we might not have had to have it at all.
Gifts inter vivos might be divided broadly into out-and-out gifts which, in general, suffer duty if they are made within five years of the death of the

giver, and a second class in which the donee, the person to whom it is given, does not maintain enjoyment and possession of what is given to the entire exclusion of the donor or of any benefit to him by contract or otherwise. If that is the case, the property will remain liable for duty, however long before the death the gift, or the surrender of the life interest, was made.
The second class comprises the kind of case in which the giver enjoys the occupation of property rent free or at less than a full rent, but hitherto in this land we have always thought that it excluded the case in which the donor came into occupation of what had previously been given pursuant to a lease from the donee for which he paid the full economic rent, because that is a case in which the donor is paying in full for the use of what he has given and the donee is receiving the full benefit of the gift just as if he had let it to some third party in the market.
The Judicial Committee of the Privy Council has lately decided in relation to an Australian enactment, which is exactly the same as our own, that that was a wrong view on the construction. It is a hard case and ought to be put right because, as the Committee will understand, the circumstances may be wholly bona fide. For instance, if a landowner makes an out-and-out gift of some of his land to his son and continues to farm other parts of his land, and if he wants, in due course, in the interests of good husbandry, to take a lease of the land which he has given to his son so as to farm it with the land which be is farming himself, that is a wholly bona fide case. On this interpretation of the law, however, which would be expected to be binding upon us, it would result in the gift remaining liable for duty however long before death it had been made.
That is what the Clause does in the first instance. It does something in


favour of the taxpayer. It also does something else. It corrects a weakness in this part of the law in favour of the Revenue. The first point relates to gifts inter vivos and surrenders of life interests, but the second point is concerned only with gifts inter vivos.
The weakness is this: supposing the donor gives a gift but receives a benefit by a wholly separate and distinct transaction. An example would be if A makes an out-and-out gift of land to B and then B grants to A an annuity equal to the annual value of the land. The Revenue can extort duty only if it can link the two transactions. It is sometimes remarkably difficult to do it, but it ought to be done in the true case. The Committee will remember that we put this right in the Finance Act, 1950, in relation to surrenders of life interests. We did that by enacting that benefits received by virtue of any operation associated with the surrenders were to be taken into account in the context. Subsection (3) of the new Clause makes an exactly parallel enactment in relation to gifts inter vivos to cure that weakness. That is all that the Clause does. I submit that it is necessary and innocuous.

Mr. Mitchison: I doubt whether any hon. Members on this side of the Committee, at any rate, will object to the new Clause in principle, but it raises one point. It relates to a lease of the type about which the right hon. and learned Gentleman was talking. The lease must be a lease for full consideration in money or money's worth. What strikes me as rather remarkable is that, when we are dealing with Estate Duty and other financial matters, the Treasury seems to have no difficulty in determining what the right rent for a property is, that is to say, what is in effect full consideration in money or money's worth.
However, those concerned with rating recently put off rating revalution for a matter of four years upon the ground that there was no such thing at present as a stable market in ordinary house property and accordingly no one could say what the proper annual value of that property was when let to the hypothetical tenant who is assumed for rating purposes.
I wonder whether the excuse then given or the reason then given, if I may

be more courteous about it, is wholly consistent with what the Government are now putting forward in this Clause. They will appreciate that it has a distinct relation to this Clause, because if they are not able to determine what "full consideration" is and if there is some doubt about what is the full and proper rent in cases of this kind—some of them may be large cases; others may be small ones—the door may be closed by subsection (3) to one kind of fraud or contrivance, but it may equally be open on the question of a lease to another kind of fraud or contrivance, because what some people would think would be full rent may not, in fact, be truly full rent. Yet, since the Government are unable to decide what is the right annual value of property for rating purposes, they may be unable to decide what is the right rent for Estate Duty purposes.

Mr. Mulley: The whole Committee will welcome the Clause in so far as it is concerned with putting right the decision in the Judicial Committee of the Privy Council in an Australian farming case. It should also congratulate the Solicitor-General on the extremely funereal air which he manages to bring to our discussions on Estate Duty.
One distressing note which I detected in the right hon. and learned Gentleman's speech was that, as well as putting right in favour of the taxpayer a discrepancy which no one knew existed until the Judicial Committee of the Privy Council found it, the Government were taking the opportunity of putting right on behalf of the Revenue the discrepancy in the situation with regard to associated operations between inter vivos, which was not completely covered, and the surrender of life interest which we on this side of the Committee dealt with in 1950. It seemed to me from the reasoning of the right hon. and learned Gentleman that, if the Judicial Committee of the Privy Council had not taken the decision it did, we should still have the anomaly about associated operations and inter vivos.
While we are very glad that this opportunity has been taken as a new Clause and not as part of the original Bill, I should like an assurance from the right hon. and learned Gentleman that, where loopholes are known to exist, the


Government do not have to wait for a judicial decision on any point before bringing before the Committee legislation to rectify loopholes which are only too well known to the Treasury. Before we pass the new Clause tonight we should be given that assurance by the right hon. and learned Gentleman.

9.0 p.m.

The Solicitor-General: Of course, subject to considerations of time, sizes of Finance Bill and the like, I imagine that it is a very clever person who discourages the Revenue from closing loopholes, if they are found to exist in its armour. I do not think that the hon. Member for Sheffield, Park (Mr. Mulley), or the Committee need have any doubt that opportunity is persistently being taken for closing loopholes as they are found.
With regard to the observations of the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison), which were of such an enjoyable character, I wonder whether it would be impertinent to deal with him in this way. I do not think that he need have grave anxiety about the Government's ability to assess full consideration in the context here. It is not a matter, ultimately, for the Government. It goes, for instance, to the Court of Appeal, and I have no doubt that the Court of Appeal, if necessary, when we get there, does not have the slightest difficulty in saying what is or what is not full consideration.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause—(EXEMPTION FROM EXCISE DUTY OF VEHICLES FOR CLEARING SNOW, &C.)

(1) No duty shall be chargeable under the Vehicles (Excise) Act, 1949, in respect of any mechanically propelled vehicle constructed or adapted, and used, solely for the conveyance of machinery for spreading material on roads to deal with frost, ice or snow or for the conveyance of such machinery and articles and material used for the purposes of the machinery.

(2) In paragraph (a) of subsection (5) of section five of the said Act of 1949 (under which a goods vehicle is not chargeable with additional duty in respect of a trailer if the drawn vehicle does not exceed five hundredweight in weight and is constructed and used solely for spreading loose untreated gritting material) the words "not exceeding five

hundredweight in weight" and the word "untreated" shall cease to have effect.

(3) This section shall come into operation on the first day of October, nineteen hundred and fifty-nine.—[Mr. Hay.]

Brought up, and read the First time.

The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. John Hay): I beg to move, That the Clause be read a Second time.
I need not detain the Committee very long, as the purpose of the Clause is simple and has been discussed at an earlier stage of the Bill. The Committee will recollect that when Clause 11 was under consideration, my hon. Friend the Member for Langstone (Mr. Stevens) drew attention to the anomaly under which vehicles and machinery used for gritting, or depositing a mixture of salt and grit on the roads in frosty weather, have to pay vehicle Excise tax. We have looked into this. My hon. Friend the Joint Parliamentary Secretary gave an undertaking that on Report we would seek to introduce our own Clause to put the matter right, but we have improved on that undertaking in that we have been able to table this Clause during the Committee stage after all.
I think that the Committee as a whole will understand the language of the new Clause which, unlike some of the other Clauses, is pellucidly clear In those circumstances, I simply commend it to the Committee, and hope that we shall add it to the Bill without delay.

Mr. E. C. Redhead: I appreciate that the new Clause is made in response to the undertaking given on Second Reading, and I certainly do not quarrel with the expressed intention of subsection (1). As local authority road construction vehicles are already exempt, under the main Act, of any duty chargeable on vehicles when drawing a snow plough or similar contrivance, it is clearly sensible and logical to extend the exemption to the vehicles specified here. Nevertheless, I feel that the Clause is still somewhat limited in its character.
I question whether it is really justifiable to extend the exemption to this class of vehicle whilst still leaving nonexempt, for example, local authority


watering vehicles, which, I should imagine, are just as essential for the maintenance and good condition of the public roads.
Further, I am extremely doubtful whether the present drafting does all that the Chancellor intends and desires. I understand that machinery of this character, which is used for gritting the road or adding other material to the road in order to deal with snow ice and frost, is sometimes fixed permanently to vehicles which would, therefore, come within the exemption provided in the Clause. However, I understand that not infrequently a vehicle is used or adapted for that purpose only at such times a it is necessary and that, in between times, the vehicle will have other uses quite essential for road maintenance and so on.
The former, as I say, would be within the terms of exemption as drawn for it, but the latter type of vehicle, although perhaps substantially used for this purpose, would not get the benefit of the exemption because the Clause is conditioned by the phrase:
… any mechanically propelled vehicle constructed or adapted, and used, solely for the conveyance of machinery …
I appreciate that this qualification is in similar terms to that which applies to road construction vehicles. I suggest in that latter case that the condition is more understandable in so far as those vehicles will normally he in more constant use for purposes of road construction.
Again, I have some query with the words at the end of subsection (1)—
… for the conveyance of such machinery and articles and material used for the purposes of the machinery.
I have spoken to a public cleansing superintendent about this, and his first impression was that the Clause, while it would permit the conveyance of
material used for the purposes of the machinery",
would not include such material as grit and salt which are actually used for depositing upon the roads. It is open to construction either way. In that sense it needs to be looked at. At the same time, it would be advisable to have regard to vehicles which are used by local authorities for a wider range of

activities than that contemplated by the Clause. I hope the Chancellor will see the wisdom of extending an exemption of this kind, because local authorities ought not to be penalised in having to meet a duty of this kind on vehicles which are essential for maintaining road surfaces.
Therefore, while I do not quarrel with the general purpose of the Clause, I am a little doubtful whether it would achieve all that is claimed.

Mr. Stevens: I thank the Chancellor not only for the speed of the undertaking which he gave earlier in Committee but also for the pellucid manner in which he has implemented it, even if the pellucidity is less obvious to the hon. Member for Walthamstow, West (Mr. Redhead) than it was to the Parliamentary Secretary to the Ministry of Transport and Civil Aviation, who seemed to think there was no doubt about the matter. However, I thank my right hon. Friend very much.

Mr. Hay: Perhaps I may say a:word to the hon. Member for Walthamstow, West (Mr. Redhead). In my naiveté, I thought this matter was perfectly clear. I thought that by comparison with some of the Estate Duty Clauses in the Bill we should have no difficulty. But the hon. Gentleman is more knowledgeable of these matters than I am. I can only say that we are advised that the drafting of the Clause carries out the purposes which he has in mind. However, without giving any undertaking on the subject, I assure him that we will look at this point in the light of his observations.
With regard to water vehicles, the Committee is in a difficulty, to which it is not unaccustomed. When a concession is made it is often necessary for people to suggest that the concession should be extended. However, since we are trying to deal here with a rather limited point, namely, that of the snow-plough and of snow-treating appliance, if I may use that expression, I must resist any attempt at this stage to extend the purpose of this concession to other types of vehicle.
There may be all sorts of other considerations which apply. We feel that since, as the hon. Gentleman has said, the great majority of these vehicles or pieces of machinery are in the hands of


local authorities and are used for public purposes, the exemption is justified. Beyond that I cannot go, but I hope nevertheless that the hon. Gentleman and I can find common cause in supporting the Clause as it stands.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause.—(REPEAL OF ENTERTAINMENTS DUTY.)

(1) Entertainments duty shall not be chargeable in respect of payments (whenever made) for admission to entertainments given after the thirty-first day of July, nineteen hundred and fifty-nine.

(2) Where entertainments duty has been charged on any payment made before the first day of August, nineteen hundred and fifty-nine, and by virtue of this section no duty should have been charged, the person by whom the duty was paid shall be entitled to repayment of the overcharge.

(3) On and after the first day of August, nineteen hundred and fifty-nine, the Entertainments Duty Act, 1958, shall no longer have effect.—[Mrs. White.]

Brought up, and read the First time.

Mrs. Eirene White: I beg to move, That the Clause be read a Second time.

The Deputy-Chairman (Sir Gordon Touche): I think that with this proposed new Clause it will be convenient to discuss the new Clause—"Reduction of entertainments duty"—standing in the name of the right hon. Member for Blackpool, North (Sir T. Low) and other hon. Members, which reads:
The amount of entertainments duty chargeable on payments for admission to entertainment given after the eleventh day of April, nineteen hundred and fifty-nine, under the Entertainments Duty Act, 1958, shall be reduced by the sum of twenty pounds per week in respect of each place of entertainment; and if, before the date of the passing of this Act duty has been chargeable without regard to the aforesaid reduction and by virtue of this section a less amount of duty or no duty should have been charged, the person by whom the duty was paid shall be entitled to repayment of the overcharge.

Mrs. White: Agreeable as it is for anyone who normally sits on the back benches to have the opportunity of appearing at the Dispatch Box, nevertheless I would have been most happy if, on this Finance Bill, it had not been necessary for me to do so on this occasion. Had the Chancellor of the

Exchequer in his Budget proposals taken the step which those of us who are concerned with the film industry fully expected he would take this year and abolished the Entertainments Duty, or rather the cinema tax as we should call it, it would not have been necessary to have any discussion this evening at all. Unfortunately, in his Budget speech, the Chancellor did not even mention the matter. In the speech with which he opened our Second Reading debate on the Finance Bill, the Financial Secretary did not even mention the matter. In his winding-up speech at the end of the Second Reading debate, the Chancellor confined himself to three very brief sentences. We are obliged, therefore, to return to the subject.
As the Committee will appreciate from the new Clause which we have tabled, we are asking for the total abolition of the tax. It has been discussed at length fairly recently, and I do not wish to weary the Committee by going in very great detail into arguments which appear to us on this side to be incontrovertible. I will merely remind the Committee of the reasons why we think that it is unwise and unjust to continue to tax the cinema industry at all. When I was looking at one of the trade newspapers on Friday of last week, I was interested to see that, during the present week, the cinemas in four of the main provinces of Italy are closed altogether in protest against their very heavy entertainments tax. Clearly, we are not alone in having a Chancellor of the Exchequer who is unable to recognise the real needs of the cinema industry.
Anyone who looks at the present situation in the industry cannot possibly remain unpersuaded of the futility of taxing an industry which is having such clear financial difficulties. In 1958, admissions to cinemas totalled 752 million, in round figures, as compared with 925 million in 1957, a drop of 150 million attendances in one year. The box office takings dropped by approximately £10 million in one year. While the figures given for cinemas which have been closed vary slightly—those given to us in answer to Parliamentary Questions do not entirely coincide with the trade figures—I reckon that about 800 cinemas have closed in the last five years.
for this year, one has provisional figures only, of course, but I am told that for the first quarter of 1959 there was a further fall in admissions of 20 per cent. by comparison with the corresponding quarter in 1958. That was a very heavy drop indeed, as I am sure the Committee will agree. Usually, in the spring, one expects a slightly better attendance than one expects in the Christmas quarter. This year that did not happen the figures were worse than usual. I am told that this is the only year since the war in which the figures for the first quarter have been lower than those for the preceding Christmas quarter. Although there are no firm figures for the current quarter, I am told that attendances in the current quarter are running at approximately 15 per cent. below those for the corresponding quarter of last year.
It seems perfectly clear that the industry is not in a position to bear a tax which is still, in spite of concessions made last year, running at a very heavy rate. It is calculated that the tax which it is likely to bring in this year, unless the rate of decreased attendances accelerates even faster than was estimated, is about £9 million. When one considers the Chancellor's Budget, that is a very small sum, but for the industry it is a very considerable sum indeed. We cannot help thinking that the Chancellor would be ill-advised not to abolish this tax once and for all this year.
9.15 p.m.
I do not want to say much about the other new Clause which has a quite distinguished backing. I do not think that the right hon. Member for Blackpool, North (Sir T. Low) is present, but other hon. Members who support the new Clause are here. Various calculations have been made in the Press about the probable effect of the new Clause. They vary between a remission of £2 million and £2¾ million a year, but, whatever the precise figure may be, it would be a very small remission compared with the total abolition of the tax, which we on this side think is the only sensible thing to do.
We cannot see the point of having a small nibble at the tax this year and then having to come back again next

year, as we should undoubtedly do, and ask for further concessions. This would leave the industry in a state of considerable uncertainty. It has already been subjected to uncertainty for a long time. We are very much concerned with the effect of this prolonged uncertainty upon the owners of the cinemas. It is true that the smaller cinema owners may consider that they get some slight help by a partial remission—obviously they do—but I think that the industry would be in a far healthier state if it could know precisely where it stands and if it were not left in a state of uncertainty as it will be if it gets only a token remission.
This matter is extremely important not merely for the exhibitors but for British film production. It is, and has been for a long time, one of the main concerns of the House that we should sustain the production of British films at a level which does us credit, both in quality and quantity. I emphasise particularly that at present British film producers are making special efforts to ensure that our films are shown not only in this country but also abroad. It is true to say that half the earnings of film producers come from exports, which is a quite remarkable achievement when one considers their great difficulties in obtaining permission and getting over quota barriers in other countries.
A very strong delegation from the film industry is waiting to ask the President of the Board of Trade for further assistance in this matter, but I think that it is clear to all that the very desirable and extremely important export industry of British films cannot expand much further if it is left in doubt about the exhibition situation at home. If it feels that it is seriously contracting and is subject to uncertainty and anxiety, it would clearly be much more difficult for British film producers to continue this quite remarkable effort in export expansion. I think, therefore, that we in this House have a duty to help the industry on the producing side as well as on the exhibiting side, because it is clear that the producers are making a very strong effort to help themselves.
Furthermore, the representatives of the industry have pointed out, and with reason, that although they are at present suffering severely from the competition


of television, they have reasonable expectation that within the next couple of years—possibly by 1960–61 and in any case by 1961–62—the effect of television will have stabilised itself. Experience in the United States has shown that one can expect a certain steadying in the decline of cinema attendances and it is calculated that in this country that will probably be reached at a figure of about 600 million attendances a year. Therefore, say the representatives of the industry, they should be allowed to survive at least that long, and in order to do so they should have a complete remission of tax. I do not think that a partial remission this year is the answer.
One of the obvious technical points to be discussed on the second of the two new Clauses is that its proposal would have the effect of helping not merely the exhibitor, but also the renter, because unless some agreement were reached in the trade—and so far, I understand, no such agreement has ever been discussed—the effect of this method of dealing with the matter under the ordinary arrangements current to the trade would be that this proposed remission would be shared between the exhibitor and the renter. We need to know a little bit more about that. Also, it would have the effect of a rebate which hitherto we have always been told has been impossible on this form of tax, because the theory has always been that the tax was upon the person who bought the ticket and not upon the exhibitor. We might, perhaps, have a word about that as the Clause is being discussed, because it is quite new in principle to anything which has been done hitherto in this direction.
Those are important details which we can discuss later. The real issue is whether there is any wisdom in continuing a punitive tax—for that is what it is—in the present state of the cinema industry and whether it is not our duty to say that the time has come when this tax, which is discriminatory against one form of entertainment only and at a time when it is undergoing great difficulty, ought not to be removed altogether. What is the sense of allowing an industry which is facing difficulties, but which is making a great effort to help itself, to be starved? If the patient is suffering from malnutrition, as one might say is the case with the cinema

industry, what is the sense of keeping nourishment from it or of allowing it just a spoonful or two when it could be allowed to have the full £9 million?
We on this side are unrepentant in saying that the time has come to remit the tax altogether, to end any uncertainty that may exist and not to continue it year after year. We therefore ask that our new Clause should be accepted.

Mr. Geoffrey Hirst: In recent years, I have probably made nearly as many speeches on this subject as the hon. Lady the Member for Flint, East (Mrs. White.) I have certainly had the pleasure of following her on numerous occasions and I trust that she will accept it in the sense and with the graciousness which I intend when I compliment her on her performance tonight at the Dispatch Box. Although I have made a number of speeches on this subject, however, I have not yet done so from the Dispatch Box. That, I might add, is not an invitation.
If I cannot go quite as far in commending to my right hon. Friend the Chancellor and to the Committee the new Clause introduced by the hon. Lady as I can the second Clause in the names of my hon. Friends and myself, I hope to make my reasons clear.
I should not on this occasion be fair to the memory of my own speeches if I did not say that I see a great deal of the substance and accept a great deal of the case which the hon. Lady has presented to the Committee. I think it is almost true to say that today the cinema tax, as it is known, is getting almost as out of date as the Window Tax of some years ago.
The film industry, to be fair, does not of course pretend that its only trouble is the Entertainments Duty and that if it were completely removed the industry would be anywhere near out of the wood. I do not think there is any virtue in exaggeration, credit however should be given where it is due. I think that a rather large degree of exaggeration once existed, it has now gone, and in the last two years the case has been well presented. The Committee cannot be unmindful of the fact that recent events indicate that the case presented year after year, certainly since 1957, has been substantially borne out by events.
Therefore, there is some substance in it but it is also true that we must be mindful that the Conservative Government have taken action on no fewer than three occasions, and in a very substantial way last year. We must not underestimate that. A substantial amount of tax was remitted last year, in a year when there were no other very great remissions. Something like half was remitted; £14 million it was meant to be, and if it turned out to be less, it was because of the lower admissions. Nevertheless, it was a considerable sum. Moreover, there are other claimants to tax remissions, and no Member of the Committee can be unmindful of his responsibilities to the large number of people with a large number of claims, and it cannot always be possible for any Chancellor of the Exchequer, so to say, to nibble away a large amount of tax from the same source every single year.
The need, however, is undeniably great. The hon. Lady has drawn attention to the fall in admissions. The figures, of course, are astounding, if one goes through the whole ambit since the reorganisation after the war. Even more impressive, they have been halved since 1948, and there has been a drop of about 50 per cent. since as late as 1956. There is no argument, I think, in any part of the Committee on the matter of the great fall in admissions, but, of course, that is not to say—and I want to present the case as fairly as I know how—that the fall in admissions can be corrected entirely by remission of entertainments tax or cinema tax, largely because it does not go into seat prices, though it does have certain other effects, as I shall indicate in a second or two.
There are a lot of causes for this fall in admissions. Obviously—and the industry accepts the fact, which is perfectly clear—television is the premier one. That was, of course, the start of the great fall in attendances in the United States. After a time it levelled off a bit. Certainly, here it has had its effect and it is not complete yet. Then there has been some change in habits. Of course, this is due to wider consumer choice. I think we must recognise that the rising standard of living which Conservative policies have brought about, not least in the increase in the use and in

the numbers of owners of motor cars, has at least contributed to some of the difficulties of the cinema industry, but television is on the up and up in claiming the attention of our people. About 10 million licences will be issued in a very few months from now.
There is the other side, and I want to put the matter in all aspects, that while admissions have fallen, as has been made perfectly clear by statistics, overheads have increased, the cost of operating, the cost of wages, of film transport, heating, lighting. That has to be set against the background of falling admissions and, therefore, of the fall in gross takings.
I understand that the trade has to meet serious losses at the moment, and this year no less than 28 per cent. of cinemas run at a serious loss. If nothing is done this year, it will be about 60 per cent. by next year. I have had the opportunity of speaking with somebody who is well-informed on this matter, and I gather that those figures are slightly optimistic. Be that as it may, they are quite serious. They are so serious that there is something to be said for trying to step in once again, if my right hon. Friend the Chancellor feels he can do so, to minimise something of that loss. That, I would claim, our Clause will do. Certainly figures of loss of that character, involving a large number of closures, represent a major crisis in the industry.
9.30 p.m.
The industry is more vulnerable, for reasons obvious to all, than is the American industry. The hon. Lady the Member for Flint, East mentioned exports, quite rightly. I should like to add one other fact. Although the figures are yet small, measured in millions, against those for many other industries, the increase in exports has been really phenomenal. If a large number of industries in this country had been able to increase their exports proportionately to those of the film industry in the last three or four years, we should now have a better, more sound and less dangerous economic situation in the matter of the need for exports. The industry has done a magnificent job. Although the number of millions of pounds is small in relation to other industries, these are a high grade of exports in that they involve practically no material and, therefore, are net


exports from which we derive the greatest advantage.
Again, there is the political and social importance of British films which cannot be over-stressed. These films help to display Britain and British ways on the screens of the world. This is a vital and incalculable contribution which can play its part in "hotting-up", if I can put it that way, our retaliation in the cold war by presenting Britain in a British way, which these films do so well. There is also the humanitarian point of view in that those employed in it have a great stake in the industry and are naturally somewhat nervous of the way things are going.
I do not think that it would be quite in keeping with one's responsibilities to overstress a case of this nature unless one felt that the industry had been trying to do something to help itself. I want to make that claim for it. Within the limits of its resources it has gone in for a considerable number of new methods of production and techniques. One has only to go to some of the leading houses to see what is being done in that direction. Exhibiting houses have used wisely the remissions of taxation which we have been able to make to put their houses in better shape, to renovate them and to install modern techniques. Provided that there are good films to show, this is the only way in which the public can be brought back in sufficient numbers to the cinemas.
The industry claims that the tax is discriminatory against it because no other industry is now taxed in the same way. It feels that it is being made an outcast, and it claims that the tax is unreasonable because it has to be paid even if a loss has been incurred, though it is not quite alone in that category.
In spite of all these strong arguments, I might have hesitated to press the case so strongly if I were not quite confident—and I am sure that I speak for many of my right hon. and hon. Frinds—that this type of help might be the best and most helpful thing that the Chancellor can do this year, within the framework of a Budget which has reduced the levels of taxation so much in so many other directions that it has obviously limited the extent to which, twice running, he can help the industry in this way.
The proposed Clause which I particularly commend—"Reduction of Entertainments Duty"—is, I think, very clear in its purpose and does not upset the existing machinery by which Entertainments Duty is collected or the machinery whereby the production levy is collected. It only means that the sum is worked out according to the rules and regulations of Customs and Excise and that in the event of £20 or more becoming payable the £20 can be deducted before the sum of money for Entertainments Duty is handed over to the Inland Revenue, and where the sum is less then to the extent to which that sum is payable.
I agree with the hon. Lady when she says that that will not all go to the exhibitor. That is perfectly true. We have to look at it more broadly than that. What we surely all have in mind is the need of the industry as a whole. It is impossible to separate film production from film distribution or film exhibition. It is all part and parcel of the same thing. It does not mainly go to the rentier.
I do not think it is up to us as a Committee or the Chancellor of the Exchequer himself in these matters to go into these niceties. It is a matter of organisation within the industry how it can best use the money that this Parliament can give to it. I would myself say that it would be extremely unwise if it did in fact use it entirely in a parochial sense. It must be used for the benefit of the whole industry because we shall not fill exhibition houses, whatever we do about Entertainments Duty unless we have good films and vice versa.
I trust that the Chancellor will feel that he can go possibly as far as the new Clause, and accept the intent which is perfectly implicit in it. I wish to draw his attention to the second and concluding part of it, because those words are borrowed from the Finance Act, 1958, and are merely following out in this instance precisely the same thoughtful and reasonable form of justice that was given to the industry by the reduction last year in a similar context.
It would be breaking what I believe is now thought to be a just way of handling this matter if the second part


were not included in the intent of the Clause. It may be that in our amateurishness we have not quite achieved the practical in this Clause, and I have heard one or two little difficulties mentioned to me concerning its operation. I am not too worried about that, provided the intent and purpose and roughly the amount, which I imagine is about the figure mentioned by the hon. Lady or probably higher, can be made available on this occasion.
If there is any possibility of that intent being accepted broadly, I would be happy to accept my right hon. Friend's assurance. If he can find some words to carry out approximately this intent, as I earnestly hope he can, and can give me that assurance tonight, before the Report stage, I would not find it necessary to move the Clause when it comes up for consideration.

Mr. F. H. Hayman: I rise to support this Motion, because, as I have said in the Chamber before, and as recently as April, I consider this tax to be unjust and inequitable. It involved the closing of a cinema in my own town, Redruth, on 30th April, and the Chancellor was reminded of this fact when he spoke in Camborne two or three weeks ago. I was reminded of it when I saw outside this closed cinema the effigy of an undertaker with, beside it, the notice, "Strangled by the Chancellor of the Exchequer".
As was pointed out to the Chancellor himself, this cinema circuit of four cinemas in the area paid no less than £27,000 in tax last year. That is an atrocious tax on an industry which, as the Committee know, has been struggling for existence in recent years. Therefore, I ask the Chancellor, even at this late hour, to reconsider this hit at the cinemas which, in counties like Cornwall, provide for people in the towns and the rural parishes. I ask him to think again, to accept this Clause, and not to be intolerant in pursuit of the last penny from this industry.

Dame Irene Ward: I want to ask only one or two questions. All the time I have been in the House of Commons I have not spoken on this kind of Clause and I am only doing so new because I seem to recollect that

some time ago a member of the Treasury Bench stated that he had no individual figures. When I consider all the speeches that are made, it occurs to me that very few individual figures are given. Generally, we put our case in an overall way, and though I think that that is important I am rather more interested in detail and I want the answer to the figures that I shall give.
I am one of the supporters of the proposed new Clause in the name of my hon. Friend the Member for Blackpool, North (Sir T. Low). In the town where I live, Gosforth—it is really a village, though it is growing into a town—lives a well-known figure in the cinema world who is a member of another place, Lord Westwood. He has connections with the Globe Cinema in Gosforth, which has been there for a long time and, on the whole, shows quite good films. Gosforth has a great affection for the cinema. I asked Lord Westwood if he would give me the figures in connection with that cinema for the last year and he has informed me that the loss on the year's working was £1,620, that he paid £1,932 in Entertainments Duty, and that the film levy paid was £563; that is to say, he paid £2,495 and the loss was £1,620.
It may be that Lord Westwood has a lot of cinemas and may have recouped his losses in some others. I do not know. That is what I am asking my right hon. Friend to deal with, because I have always understood—perhaps incorrectly, because I do not regard myself as having a great knowledge of figures—that one does not pay tax if one does not earn. That has always been the principle, that one cannot pay on a loss.
9.45 p.m.
I try to be a practical person and if these figures are correct, all I have to say to my right hon. Friend is that I think the Treasury is "plumb silly". I do not understand how my right hon. Friend can go on asking anybody who owns a cinema to pay more in tax than he earns. This particular cinema, as I have said, has carried a loss and no one can go on doing that for very long. I do not think that my right hon. Friend wants to do the cinemas down, or wishes to close the cinemas for some reason or other. I do not suspect for one moment that he wishes to do that; because I think that when he has the time, and can


get away from yachting, he goes to the cinema. But if he does wish to do so, he need not take any notice of this proposed new Clause.
I am sure that the figures I have quoted are accurate, because Lord Westwood would not give me inaccurate figures. He is well known and highly respected in the industry. If these figures reflect the position, surely, on the basis of equity and justice, my right hon. Friend ought to do something about it. As a supporter of the Government, I do not particularly like being asked to do something which seems to me to be "plumb silly" and I hope, therefore, that my right hon. Friend will accept this Clause.

Mrs. Jean Mann: I did not intend to intervene in the debate on this Clause, because in this Committee we have so many experts on the question of losses and profits. Some time ago hon. Members were invited to Westminster Hall to meet a good many of the film stars. I was impressed by a graph which was shown on a blackboard which indicated that even though the Chancellor gave us what is asked for in this Clause the cinemas would still be well "in the red".
I do not understand why the Chancellor, be it the present Chancellor or the one we are likely soon to have—provided the Prime Minister takes him along by the hand and speaks to him close to his heart—does not consider that he owes the cinema a rebate for what was extracted by way of tax from the industry during the last year. In my opinion, the industry is owed a rebate, just as individuals expect a rebate of Income Tax when their incomes have been reduced.
A number of years ago it could have been said that the cinemas were not doing their best. Recently I have been visiting the cinema to see whether the film producers are making an effort to do better. I saw "Bridge on the River Kwai". I saw "The Inn of the Sixth Happiness". I saw "The Horse's Mouth" and I saw "Indiscreet", "Separate Tables", and a good many others, including "Dunkirk" and "A Night to Remember". I may add, if hon. Members are interested, that there was nothing at all of importance that I

should remember on that particular night beyond the fact that the film "A Night to Remember" is, as most hon. Members will know, the story of the sinking of the "Titanic". It is well worth preserving. To give us that film was a splendid work, and the same could be said of "Dunkirk", which was a most historical memento of the valiant bravery of this nation in its darkest hour. The others deserved the adjective which is often a superlative, for some of them were "stupendous" productions.
I was very sorry to know that I could have been offered any seat at any time. So sparsely were those productions attended that on one occasion when I had dropped my purse on the floor in walking out I went back and picked it up, in the dark, without any difficulty. On another occasion I dropped my glove and again in the dark I went back and picked it up, in a lonely quietness which was appalling and depressing. One felt very sorry for the people who were trying to start a movement to draw us away from our television screens. We should give the television screens a rest. Although I am very fond of television I am a selective viewer.
It is also very worrying in the cinemas when the heat is forced on. There have been letters to editors about the high temperature in cinemas. They have asked, "Why is the cinema always so hot?" The reason is that the proprietors want to encourage the sale of ice-cream. In my constituency cinemas the heat is turned on whether I am there or not in an effort to push the sale of the ice cream. The proprietors are also compelled to run competitions to attract people to see what they ought to go to see without inducement.
I do not know how any Chancellor of the Exchequer can continue any longer extracting money from an industry which is making so valiant an effort to recover. Give them time. If money comes along in two, three or five years' time, start the system up again. I do not think there is the slightest justification for taking anything further from our cinema trade now and for a long time to come.

Mr. Donald Wade: The cinema industry has all-party support tonight. There was great disappointment in the industry when it


became known that the Chancellor had decided not to abolish this tax in his Budget. Sooner or later this tax will be repealed. The danger is that repeal will come too late, or too late for many cinemas.
The cinemas have been having a difficult time as a result of competition from television. That does not alter the fact that the tax is not only onerous but is impossible to justify on any ground of principle. It is a tax, as the Chancellor must admit, on turnover and not on profits, and might make all the difference between paying and not paying. The hon. Member for Tynemouth (Dame Irene Ward) said that it was useful to have precise examples. I propose to give an example. The case has already been well argued and may be illustrated by examples of what is happening.
Among my correspondence I have a letter from a Mr. W. A. Newton, of Huddersfield. He refers to three cinemas in Huddersfield and district in a letter which was written before the Budget and when he had not heard the disappointing news. In his letter he said:
I would like to point that the above three cinemas have been kept up to date.… They have not been neglected in decoration and comfort. It is with these things in mind that it would be a great tragedy to have to think of closing any of these cinemas which, I am afraid, will happen if the Tax is not abolished.
He has been good enough to give me some figures which I am permitted to quote. I think these figures bring out clearly the problem facing many cinemas as a result of Entertainments Duty.
Cinema No. 1 in 1958 had gross takings of £4,701; Entertainments Duty £1,065; loss £1,287. In that case the loss is slightly more than the Entertainments Duty. Therefore, there would have been a small loss if there had been no tax. In the second case, gross takings were £6,895; Entertainments Duty £1,478; loss £478. It is quite clear that there would have been no loss but for the tax. The third cinema, which is well known to me, is a larger one. The figures there were: Gross takings, £22,351; Entertainments Duty £7,163; British Film Production Fund £359; loss £878. It is quite clear from those figures that that cinema would have paid its way reasonably comfortably if it had not been for

the effect of the Entertainments Duty which is turning a reasonable profit into an annual loss.
Obviously, cinemas cannot go on indefinitely losing money in this way. In my view, the only possible course to take—and one which I hope the Chancellor will take—is to repeal this tax. In the long run the Chancellor probably would benefit, because it is better to receive tax on profits which are made and which will continue than to receive Entertainments Duty for a short period on cinemas which very soon will have to close.

Sir Harold Roper: ; I should like to add my voice in favour of one or other of these two Clauses, I am grateful to the Chancellor for the concessions that he has made in past years, but I hope that he will be able to go one step further this evening.
I was talking recently to the proprietor of a couple of cinemas in a West Country holiday town. He told me that over past years overall he had made a loss of £5,000. During the period in which he made that loss, he paid in Entertainments Duty no less than £80,000. We have been given figures showing the decline in attendances. I have recently been given figures showing the net number of closures of cinemas, taking into account some which have come into operation again. Over the past three years the number of closures has averaged just on 200 a year. In the first four months of this year, however, the rate of closures has doubled; it has been at the rate of 400 closures a year.
We all know that there are other causes, apart from Entertainments Duty, which lead to this result, but I do not think there can be any doubt that the incidence of Entertainments Duty is a contributory cause. It is contributing to the decline in the cinema industry. I hope that if the Chancellor cannot agree to the total abolition of the duty, at least he will be able to accept the new Clause in the name of my right hon. Friend the Member for Blackpool, North (Sir T. Low), to which, also, I subscribed my name.

10.0 p.m.

Mr. John Rankin: It can be clearly said that on both sides of the Committee we are agreed that


something must be done to help the cinemas. That has been the mind of the House for a long time. It has been impressed on the Chancellor repeatedly by hon. Members from both sides. Last year, something was done, and we were grateful for it, as was the cinema industry, but it was not sufficient, and tonight the Chancellor is being subjected to two pulls in a contrariwise direction. From behind him he is being pulled backwards to a sum of about £2½ million, or possibly £3 million. From this side of the House we are pulling him forward towards a sum of about £9 million.
Hon. Members on both sides want to help the cinema industry, but our view is that the sum suggested by the hon. Member for Shipley (Mr. Hirst) will not meet the case. We on this side of the Committee always listen with great interest to what the hon. Member says. I am sure that he recollects the Friday three years ago last February, when, for the only time since the end of the war, we had the opportunity of a full discussion on the state of the cinema industry. On that occasion t moved a Motion calling for an inquiry into the state of the industry, and I think it can be said that I was supported on both sides of the House. The Government did not accede to the wish of the House.
We said then—and we were not prophesying—that the cinema admissions would steadily fall, that closures would become widespread and that the amount taken in taxation from the industry would slowly and steadily diminish. All that has happened, and it shows no signs of stopping. I feel that, however helpful the £2 million or so may be to some sections of the industry, it will not be sufficient to arrest the decline so apparent to hon. Members on both sides of the Committee. I hope that when he takes the decision which he must take, the Chancellor will decide to abolish the tax altogether.
May I remind the Chancellor of something he said during the Budget debate last year? The thought has crept into the minds of a good many people that the refusal of the Chancellor to abolish the duty altogether is because of a decision which has been taken that this industry ought to rationalised, and the

tax is being used as the weapon of that purpose.
In his Budget speech in 1958 the Chancellor of the Exchequer said:
… it cannot possibly be an object of Government policy to keep open the doors of every cinema in the country, regardless of the tastes and habits of the public. If people prefer to occupy more of their leisure time in other forms of entertainment and less in film-going, some reduction in the number of cinemas seems inevitable."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 69.]
I have no objection to the words themselves. It is an observation which many people can make, but it was very widely interpreted in the Press at the time as meaning that if the tax was abolished we might delay, in the estimation of the Chancellor's advisers, the concentration of the film industry which seemed to be necessary. I hope that the Chancellor will make it clear that that was not his view and that he is not using the tax for this purpose.
I want the right hon. Gentleman to look at some happenings since. It would appear that the right hon. Gentleman has given assistance in the present Budget to those industries which are competitive with the film industry while at the same time denying help to the film industry. He has taken 2d. off the beer duty. Those who drink beer are not quarrelling with that, but the net result is that brewers are now able to advertise more widely on television than they were before, to the detriment of the cinema exhibitor.
That is a real point. At least, it is one that appeals to the industry. I hope that the Chancellor will make it clear that, if he does believe that the film industry must find its own competitive level, he will not give assistance in his Budget to some of its competitors, as he has done, and deny to the cinema industry the assistance which it has been seeking for so long in the form of abolition of the Entertainments Duty.
The right hon. Gentleman must know that he is doing this at a time when on both sides of the Committee we agree that the industry is on a decline. The decline is shown by the fact that just a year ago we were discussing whether the Chancellor could afford £29 million for the abolition of the Duty. This year we are asking, not for £29 million to attain abolition, but for £9 million. Surely these are most significant figures. To me


they are arresting figures, because they prove the tremendous decline which has taken place in this industry over one single year.
It would seem that if the Chancellor does not face up to a situation that is now nation wide, abolition will not he necessary. The tax will have practically disappeared. He will be collecting it only from the major circuits, some of which, such as Granada and A.B.C. do not need to bother about the tax as they are getting budgetary help for their television interests. They are making enormous profits, but they alone cannot sustain the demands of the quota, and the demand of the statutory levy which, by Government decree, has been placed on the industry as a whole.
The situation has been recognised so clearly by Government supporters that they have put down a new Clause which seeks abolition for the small men, because, were it accepted, nobody in the industry who is paying less than £20 in tax would be called upon to pay it. That new Clause would free every small cinema exhibitor of the tax liability. On the other hand, there would be left out a very important part of the industry—the independent exhibitors, whose status must be preserved if the industry is to continue to be run on its present lines——

Mr. Douglas Glover: I he hon. Gentleman's point is a very fair one, but I think that for the general public and for the cinema exhibitor, his £20 would be more clearly stated as £1,000 a year—£20 a week for each week of the year.

Mr. Rankin: I cannot interfere with the terms of the new Clause, but the very fact that it is £20 a week would create a sort of continuing irregularity that would be disconcerting for exhibitors. In one week, the tax may be £18, and the exhibitor would not pay anything. In the following week, the tax might be £22 or £23, in which case the exhibitor would keep £20 and pay £2 or £3. That would go on week after week.
That is not a very tidy operation, and I suggest the adoption of another method which would affect every cinema. My suggestion is—and it is based on Questions I asked of the Chancellor some time ago—that we raise the tax-free allowance from the present 1s. 6d. to 2s. That method is tidy, it is in keeping with

what is now being done, and would not cost the Chancellor any more than the suggestion contained in the new Clause put forward from the other side of the Committee.
I understand that there are about 2,300 cinemas that are taxed more than £20 a week, and 1,000 that pay less than that amount. If the Chancellor were to forgo that, the cost to him would be about £3 million, plus a few hundred thousands of pounds that Chancellors do not really worry about—a little over £3 million. Were he to adopt my suggestion the cost would be practically the same, but the method is much better.
10.15 p.m.
However, I am not arguing for that. I am merely stating that if the Chancellor is thinking along the lines suggested by his hon. Friends he would be far better guided by taking the advice that I am giving him now. If he believes that advice is good, I want to offer him still better advice. It is that as a result of the series of debates that we have had on this industry and the series of demands that have been presented to him and his predecessors in the Chancellorship, it has been made abundantly clear that tampering with the tax is no solution.
While, as the hon. Member for Shipley said, it may be true that this will not take the cinema people out of the wood, and will not increase admissions, still it will remove a grievance that they ought not to have. It will right something that is wrong, and it will allow the industry to be free altogether of Government demands, and enable it, without the tax to worry it, to set itself on its feet towards what I am certain is a better and brighter future than faces it if the tax is not abolished.

Sir James Duncan: A minister of religion in Perth the other day explained why people did not go to church. He said that if the weather is fine they get into their motor cars and go out to enjoy the beauties of the countryside, and that if it is very wet they decide to stay at home and watch the television. That is what is happening in the cinema trade today. If it is fine, as my hon. Friend the Member for Shipley (Mr. Hirst) said, there are so many other activities and methods of enjoyment that the cinema loses. If it is very wet people


will not put on their mackintoshes and spread their umbrellas in order to go out to the cinema; they will stay at home and watch the television.
In supporting my hon. Friend the Member for Shipley, I suggest that the cinema still has a part to play in holiday times. I have known cinemas closed in holiday times and I have heard despairing pleas from the managers of those that have remained open because they were losing money. The hon. Member for Huddersfield, West (Mr. Wade) quoted some figures, as did my hon. Friend the Member for Tynemouth (Dame Irene Ward). Such figures have been supplied regularly to the Chancellor for some years. Year by year audited accounts have been produced showing the losses of these cinemas.
I believe there is a real need in holiday times for cinemas, and in comparatively small towns this sort of Clause would probably do more than anything else to keep these cinemas alive. It would not get them out of the wood but it would mean that they would continue in operation and would not have to he sold for other purposes. Therefore, I support my hon. Friend the Member for Shipley, without raising the wider problems referred to by the hon. Member for Flint, East (Mrs. White).
It is a little ironical that in this Budget we have done so much for so many people. We have reduced the Income Tax by 9d. We have increased the investment allowances. Of course, when one says, "Look what we have done for you", the cinema man says that that is no good for him. He is not making profits, so a reduction in Income Tax means nothing. He cannot afford to put new equipment into his cinema and, therefore,

the investment allowance is no good to him. But, he will say, a reduction of Entertainments Duty in some form or other is the only way in which he can be helped to weather the storm through which he is going. Therefore, I add my plea to the plea made by my hon. Friend the Member for Shipley and by the hon. Member for Glasgow, Govan (Mr. Rankin) that something should be done.
We have three proposals. There is the proposal made by the hon. Lady the Member for Flint, East for complete abolition. We have my hon. Friend's proposal that the first £20 a week be excluded. We have the suggestion made by the hon. Member for Glasgow, Govan, which I have just heard and have not had time to study, that the limit be raised from 1s. 6d. to 2s.

Mr. Rankin: No. The hon. Gentleman must not misrepresent what I said. I asked for abolition. But, I said, if the Chancellor has to choose between two methods, there was one which I thought was better.

Sir J. Duncan: That is exactly what I was saying, I do not honestly mind which it is. From my own constituency point of view, I think that the proposal of my hon. Friend the Member for Shipley would meet the case and, therefore, I support that. Having put my name to the new Clause, I hope that the Government will do something to meet the needs of what I believe is still an important part of entertainment in a holiday town, so that at least some cinemas will be kept in operation for the benefit of holidaymakers, whether they come from England, from abroad, or from other parts of Scotland, to visit my beautiful coast.

Mr. George Jeger: Various speakers have presented to us figures showing that certain cinema owners have been paying more in taxation as a result of this iniquitous and unfair tax than the losses they have incurred during the year. In many cases, this has gone on for a period, at the end of which the cinemas have had no alternative but to close. This is why cinemas all over the country have closed.
From one's own constituency, of course, one has had practical experience of these things. In Goole, which formerly had three cinemas, there are now two. One closed at the beginning of the year. In two other small towns in my constituency, where there is one small cinema struggling to keep alive in each, I have had representations made to me by the cinema managers to the effect that, if the present situation continues and there is no remission of taxation, both will have to close in due course.
Undoubtedly, the social effects of closing cinemas in small towns is terrific. But it has an economic effect as well. One of those towns happens to be a mining community. The miners who work various shifts at different times go to the cinema when they feel like it and when there is a film worth seeing. If the cinema closes, they will have to travel ten or twelve miles to the cinema in the nearest large town.
Some of them are doing this already. I have definite evidence that those who go to a cinema in a neighbouring town ten or twelve miles away, having a drink or some refreshment afterwards and catching the late bus back, return home late to bed and miss the early shift next morning. Then we have talk of absenteeism in the pits and a decline in production. There are economic as well as social consequences in this matter.
There is the economic effect on the industry itself. There is the general effect on those employed in the film industry, the many thousands of cinema workers, the technicians the electricians, the artistes, the actors and the actresses. There is already severe unemployment among artistes. If more cinemas close, these people who have been trained carefully for their jobs, who have practised them carefully throughout the years, will, as skilled workers, be thrown on

to the unskilled market. That will create a great deal of trouble for them and for the industry generally.
A little while ago we abolished, with general consent, the Entertainments Duty on theatres. In many cases, it came too late to save theatres in provincial towns. Many of them were forced to close because of the accumulated losses which they had incurred, in spite of the remission of Entertainments Duty which was crippling them over the years.
I ask the Chancellor to accept the new Clause and the appeals made to him on both sides of the Committee to save the cinema industry before it is too late. We know very well that, in spite of a remission of tax, some cinemas are bound to close because of the change in fashion and social habits and perhaps because the cinemas themselves are old-fashioned and unsuitable. But the industry itself is a much greater thing, as has been eloquently pointed out by hon. Members opposite, from the point of view of exports and the presentation of the British way of life and our artistry. I think that the Chancellor is sympathetic to appeals of this kind and I hope that he will accept the new Clause and abolish this tax entirely.

Mr. Glover: We have had a very interesting debate. I want to say bluntly to my right hon. Friend that I think that in the conditions that exist in the industry today this tax is immoral. The Conservative Party has a good record in this matter. We have reduced the tax in two Budgets. This tax now brings in a total of £9 million a year, but I do not think that it is the amount of tax which is important. Would any Chancellor in his right mind have considered taxing the stage-coach to subsidise the construction of the railways in the nineteenth century? One has only to pose the question in that way to realise the absurdity of it.
I do not think that the tax has a great deal to do with the closing of cinemas. I listened with great interest to the hon. Member for Goole (Mr. G. Jeger), but I wonder whether he has thought out his argument. In the villages about which he spoke cinemas are losing money, because some of the people in those villages are going ten miles to cinemas in other towns, which are also


losing money. We are faced with the fact that there is a change in the entertainment habits of the nation, and, indeed, of the world.
My own view about the cinema is that in the years to come cinemas will have to produce films like "A Night to Remember," which the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) found such pleasure in visiting. I thought that when she said that that was the only thing that she had to remember she was being a little unfair to her pair on that occasion. When we consider the hours which we spend in the House I should have thought that she would have a kind feeling in her heart for the person who allowed her to go and see that film. Those are the sort of epics which the cinema industry will have to produce in the days ahead. The domestic drama, the sort of film which can be produced equally on television, obviously will not have the pull with the public that it had in the days when television did not exist. Great epics like "The Bridge on the River Kwai" and "A Night to Remember" still draw audiences in the modern cinemas with wide screens in the large cities. I think that they will continue to draw an audience for many years to come.
That will not apply, I regret to say, to the small village cinemas. Because of increased facilities for transportation—another ten years there will probably be almost 10 million private motor cars on the road—am afraid, although I deplore it, that, irrespective of the tax, a lot of small cinemas, like so many other things in our history, will disappear when they have served their useful purpose.
10.30 p.m.
Having said that, I repeat to my right hon. Friend the Chancellor that it is not the policy of the country, or I have never understood it to be, to tax people on their losses. My right hon. Friend has been featured in the newspapers this week as a great life saver. He nearly lost his own life. Let me put it to him this way. Would he consider that it was a proper mode of conduct to go to some-body who was bleeding to death and ask him to be a blood donor? That is exactly what this tax means.
After the charge of the Light Brigade, at Balaclava, would my right hon. Friend have considered it a good thing to go over the stricken field asking the dying to become blood donors for the remainder of the army? That is exactly the situation facing the cinema industry. We are extracting money for the benefit of the nation from an industry which, very largely, is losing money.
I have been persuaded to support the new Clause to which my hon. Friend the Member for Shipley (Mr. Hirst) has spoken. I support it this year because I think that it will do good where it is most required, in the smaller cinemas. There is, however, no doubt that a Chancellor of the Exchequer in the very near future must face the fact that this tax must go. It has lasted too long and it is no longer a good tax.

Mr. Tudor Watkins: My experience of the Chancellor of the Exchequer when he was Minister of Agriculture was that if one appealed to the softness of his heart he was more inclined to give way than if one produced a great deal of facts and figures on the economic side of the argument.
I represent constituents who are dependent for their entertainment on travelling long distances to cinemas in market towns, because they are part of that 2 per cent. of the population who cannot get television. They cannot even get electricity to their areas to get any other kind of entertainment, not even sound broadcasting. For the reasons which have been put to him, I appeal to the Chancellor to keep the cinemas in those districts open.
This afternoon, I have been writing a letter, for the fourth time, to some people who wish to sponsor a film on pony trekking in Wales. What is the use of having the film, however, if there will be no cinemas in which to show it? If, tonight, the Chancellor asks for the new Clause to be withdrawn and says that he will produce one of his own to safeguard the industry, his action will be welcomed. If that were to happen, I would get the pony trekking association in Wales, particularly in my constituency, to ask him to ride Foxhunter as part of the pony trekking.
I add my voice on behalf of those cinemas which are struggling in various


parts of Wales. If the Chancellor does not carry out my suggestion, I hope that he will at least consider doing something about this tax, which is crippling the industry.

Mr. Amory: I have listened with great interest and a good deal of sympathy to the arguments advanced with persuasive eloquence by hon. Members on both sides of the Committee. My hon. Friend the Member for Shipley (Mr. Hirst) put the position very fairly indeed. There can be no dispute about the facts which have moved hon. and right hon. Members on both sides of the Committee to move or suggest new Clauses. There is no doubt that the number of people going to the cinema has fallen substantially and that as a result many cinemas have difficulty in making both ends meet and a number have been forced to close.
I think my hon. Friend the Member for Tynemouth (Dame Irene Ward) was a little confused between the tax on profits and this tax, which, of course, is quite different. This is a tax on admissions, on the attendance, on the patrons of the cinema primarily, and only indirectly in its effects on the cinema proprietors. The cinema proprietors in that sense are the collectors of the tax, in the same way as traders who collect Purchase Tax or retailers who collect the tobacco tax.
Last time we debated the Finance Bill my hon. Friend the Member for Tyne-mouth invited me to go to sea with her in a pea-green boat. I am not sure, after my performance last week-end, whether she would still wish to go with me. This evening I understood her to invite me to the pictures instead.
The hon. Lady the Member for Flint, East (Mrs. White) and my hon. Friend the Member for Shipley mentioned the position of the film production industry. This is, of course, a matter which we watch very closely and in which we take a great interest because, as the Committee well knows, the maintenance of a healthy film production industry is an accepted aim of Government policy. Statutory assistance to the industry there is provided in three ways—by the quota system for a minimum showing of British films, by the financial facilities offered by the National Film Finance Corporation, and by the arrangement for

a levy collected from exhibitors and paid into a fund for the assistance of British producers.
No one would dispute that these measures have been effective in helping to keep the production side of the industry on a sound footing. I agree with my hon. Friend the Member for Shipley that the film producers have been over recent years, and are today, putting up a very good performance in the export market. Obviously, when attendance at the cinemas is falling there must be some effect on the demand for and the profitability of new films, but, after studying such figures as I have been able to get, I am satisfied that the production side of the industry is facing its problems of re-adjustment with some success and is not in serious difficulties, still less facing a crisis.
The real problem is that of the exhibitors in those cinemas which are finding it hard to pay their way. There is, however, room for argument as to what it is justifiable to do further to help the cinema industry because the industry is undergoing financial difficulties arising from competition from other amenities. That is not an automatic reason for relieving patrons of that industry from taxation entirely. One has to look at it much more closely than that.
The decline in cinema-going is due primarily not to economic causes but, as has been said by several hon. Members, rather to changes in social habits. I do not think we have come to the end of those changes yet. In this, I suppose, there is no dispute that the growth of television is the biggest single factor, though it is not the only one. That fact is recognised by the levy on the television licence duty and by the Purchase Tax of 50 per cent. on television sets.
It would be unrealistic to suppose that this change in social habits will be reversed or the new pattern of leisure activity significantly influenced by the abolition of the Entertainments Duty which amounts on the average to 13½ per cent., or 4d. in an admission price of 2s. 6d. This would be true even were admission prices to be reduced by the amount of the duty; but in fact it is almost certain that they would not be if the duty were taken off, any more than that was done last year.
The fact is that because of the change in the way people spend their leisure time we have rather too many cinemas, and no fiscal action can obscure this fundamental problem. In the words, the closing down of cinemas which has occurred was, I think, inevitable, and I judge that whatever is done, some more cinemas must close.
There is one special aspect of the problem which I admit causes me particular concern, and one or two hon. Members have mentioned it. I refer to the position of the small rural cinemas, and cinemas serving small market towns where there is only one cinema. The profits from many such cinemas have fallen substantially, and in some cases have been converted into losses. Many of them are finding it difficult to stay open. There the social implications are more serious than in the towns. If a cinema in a large town is closed, there is almost certain to be another cinema fairly close at hand, although it may not be so convenient for everyone. But if an isolated country cinema closes down there may be no alternative within practicable reach, and I own that I am rather concerned about this section of the industry.
To get the matter in perspective, one must remember what the Government have already done. In 1957, my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft), when he was Chancellor, proposed a reduction in the duty of about one-fifth, and last year I proposed a reduction of rather more than half of the remaining duty. That amounts to a very substantial relief. The Clause in the name of the right hon. Member for Huyton (Mr. H. Wilson) does not seem to me well designed to meet what I consider to be the most important part of the problem, though I agree that if I felt I could afford to propose such a considerable sum in relief it would bring a broad measure of help to the industry. But it would be expensive. It would cost between £9 million and £10 million in a full year, and I regret that I have to decide that that is more than I can recommend to the Committee in the way of relief in the light of other very considerable reliefs which have been made as a result of the recent Budget.
Were it done, it would relieve entirely from indirect taxation about £80 million worth of consumer expenditure of a kind which is neither on basic essentials nor deserving of special encouragement on social grounds, and which, in the long run, I should think, would be able to support a moderate rate of duty along with other analogous expenditure. Therefore, I do not feel that on the present evidence it would be justifiable to relieve this form of entertainment entirely from taxation. The rate of taxation that it will bear will be a good deal lower, far lower, than is the case with many other forms of consumer expenditure on entertainment in other forms.
Furthermore, the Clause would relieve from duty admissions not only to those cinemas which are finding it hard to survive but also admissions to the large number of cinemas which are still operating at, I think, a satisfactory profit. Since the latter are not likely to pass on the duty reduction by lowering their prices, a large part of the relief would go neither to the needy cinemas nor to the public, but to the proprietors of profitable cinemas who, I think, have no strong case for the abolition of the duty at present. I must, therefore, advise the Committee against acceptance of that Clause.
10.45 p.m.
Turning now to the Clause in the name of my right hon. Friend the Member for Blackpool, North (Sir T. Low), I think that would go a lot further in the direction of giving a useful measure of help where it is most needed. The cost, of course, would be a great deal more modest—about £2½ million in a full year—and the greatest benefit proportionately would accrue to just those small cinemas we are most anxious to help.
The hon. Member for Glasgow, Govan (Mr. Rankin) suggested that I was being too hard on the cinema industry because in this Budget certain reliefs were being given to competitors of the industry. I would ask him, taking the last two or three years together, to accept the fact that the measure of relief we have afforded the cinema industry is considerably greater than that afforded to any of its competitors. He asked me whether I was intending to force the rationalisation of the industry by maintaining the tax. I should say no; it is not my intention to


force the rationalisation of the industry; but I think that whatever is done on tax the rationalisation of the industry will take effect. He suggested that another way would be better than the way suggested in the Clause proposed by my right hon. Friend the Member for Blackpool, North. He suggested that that way would be by increasing the tax-free limit. I did consider that alternative carefully, but I came to the conclusion that it would not help the smaller cinemas, which I desire particularly to help, so much as the Clause in the name of my right hon. Friend.
I do not think the Clause in its present form will quite do. It is defective in that it does not provide for cases in which two or more independent proprietors would have to pay Entertainments Duty for separate shows held at the same cinema in the same week. I am told that that does sometimes happen and there are instances in which the show on Sunday is separate from that on weekdays. Recently there was a case in which one proprietor occupied a cinema in the afternoons and another in the evenings. Clearly it would be inappropriate that they both should get a £20 relief, and some provision for apportionment would be required.
This Clause also proposes to make the change in taxation retrospective to 12th April. I do not think that would be right in principle, and it would very much complicate the administrative machine. I am, however, sympathetic to the principle of this Clause, and I want to make some response to the appeals which have been made by hon. Members in all quarters of the Committee. I shall be willing on Report to move a Government new Clause which would embody the principle and general effect of the Clause tabled by my right hon. Friend the Member for Blackpool, North, but not open to the objections I have mentioned.

Mr. Hirst: I am very grateful for what my right hon. Friend has been saying, but he referred to the last part of the new Clause dealing with dating back a rebate. I respectfully draw his attention to the fact that that was extracted completely arid entirely, word for word, from the Finance Act, 1958, in relation to the same subject last year. It is nothing new.

Mr. Amory: It sounds very painful for me if I have to reject something which I included in the Finance Act last year, and I will look into the point. My personal feeling is that it would be wrong to make the change which I propose retrospective to 12th April. If the Committee will accept the general proposal which my right hon. Friend has made in the new Clause, it will mean a further reduction of about 25 per cent. in the current rate of duty, and I believe that the 25 per cent. reduction would be directed to the assistance of a section of the industry which every hon. Member would like particularly to help.
I do not know what effect my speech will have on the right hon. Member for Huyton, but I hope that it will lead my right hon. Friend the Member for Blackpool, North and my hon. Friend the Member for Shipley to feel that in the circumstances they can withdraw the Motion and the new Clause, relying on my assurance that I will introduce a new Clause later giving effect to the proposals which they have made, subject to the points which I have mentioned.

Mr. H. Wilson: I rise not with the idea of helping to bring the debate immediately to a close or to suggest to my hon. Friends that they should let the matter go at this stage to a Division or whatever other determination we may reach. I rise for the one purpose of putting a point to the Chancellor.
We do not regard his proposal as in any way adequate to meet the situation which has been put from both sides of the Committee. It does not deal with the problem at all. It is surprising that he feels that he can go on like this, accepting the arguments which have been made from both sides of the Committee—as he has accepted them—and then rejecting the only new Clause on the Order Paper which helps to make this industry viable.
Some of us are all the more concerned because he used words which suggest that in his view the cinema industry always should be taxed. He did not say merely that he could not afford to make the concession this year and that he would offer on behalf of himself or his successor, from which ever party, to look at the matter next year. He suggested that in the long run this industry could always bear a reasonable share of


taxation on the basis of a small percentage Purchase Tax. We do not accept that.

Mr. Amory: I think that the right hon. Gentleman is not quoting me quite accurately. I said that in existing circumstances I did not see that it was justifiable to relieve this industry entirely from tax.

Mr. Wilson: The Chancellor must look at the report of what he said. He made the comment which he has just repeated, but he also said that in the long run there was no reason why this industry should not bear its fair share of taxation. That was taken by hon. Members in all parts of the Committee as a suggestion that this is a permanent part of the sales tax about which we have heard so much from various hon. Members at different times.
I do not want to re-start the argument tonight. He will be aware that what he said will start the debate all over again. He must also recognise that by accepting, in principle at any rate, the new Clause moved by the hon. Member for Shipley (Mr. Hirst), he has thrown it into the debate. We did not spend time on it ourselves because we thought that it was not adequate to the situation. There are grave practical arguments against it, apart from its inadequacy. I do not want to begin rehearsing them now, but as the Chancellor has accepted it in principle the propositions contained in the new Clause will have to be considered more seriously than has been done so far in the debate. Since there are a number of hon. Members who have important points to contribute, drawn from the experience of their own constituents in this matter—and I have a lot of letters from all parts of the country, particularly the West Country—I should like to ask the Chancellor if he would agree to report Progress so that the debate can continue

tomorrow rather than that we should press it to a Division tonight. My reason for that is that we do not regard the Chancellor's speech as in any way adequate and that we believe the problem can only be solved by the acceptance of our new Clause; but that, I think, will require too much continuation of the debate to make it worth while embarking on it at this late hour.

Mr. Amory: I would not wish to damp down a debate if a number of hon. Members wish to speak on this important matter, although I am rather disappointed that we have not managed to get this Clause behind us. However, I feel that by and large we have made very satisfactory progress today, and every speech that has been made so far on this subject has been entirely relevant to the Clauses.
Therefore, I beg to move, That the Chairman do report Progress and ask leave to sit again.

Question put and agreed to.

Committee report Progress; to sit again Tomorrow.

NATIONAL GALLERIES OF SCOTLAND [MONEY]

Resolution reported,
That, for the purposes of any Act of the present Session to authorise the payment under section seven of the National Galleries of Scotland Act, 1906, out of moneys provided by Parliament of expenditure incurred by the Board of Trustees for the National Galleries of Scotland in the performance of such functions, in addition to the management of the National Gallery and the National Portrait Gallery, as are conferred on them by or under that Act, it is expedient to authorise the payment out of moneys provided by Parliament of any increase in the sums payable under section seven of the said Act of 1906 out of moneys so provided which is attributable to any provision of the said Act of the present Session.

Resolution agreed to.

ROAD TRANSPORT DRIVERS (WORKING HOURS)

10.57 p.m.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Legh.]

Mr. John Paton: I express my regret to the Parliamentary Secretary and to the officials of the House for detaining them at this relatively late hour, but the subject I have to raise tonight is one of very great importance, not only regionally, for the region with which I am particularly concerned, but also nationally. It is the subject of the wide infringement that is now known to be taking place of the Regulations of the Traffic Acts which are laid down for the keeping of records and for the limitation of the hours of work of the drivers concerned.
When these Regulations were first laid down in 1930, they were made for the specific purpose of regulating in the strictest possible fashion the number of hours for which these men engaged in driving on our roads could be employed continuously, and to ensure that the employers themselves kept strictly correct records of the times these men put in. That was done, but it was recognised that these drivers were in a special category and if they were permitted to work undue hours on the roads they would very gravely increase the dangers to which other road users would be subjected.
We now know that during the last few years there has been a growing increase in the volume of these infringements, and we have reached a position today where it can truthfully be said that the Regulations to which I am referring are more or less openly flouted over great areas of the country. This is a very serious and important matter, because it should be recognised by the Ministry—and I have no doubt that they do recognise it—that the effects of extreme fatigue on a driver are just as deadly as the effects of taking alcoholic liquor; indeed, the effects are not greatly dissimilar. Therefore, we have to deal with a problem which is just as deadly in its effects on the conditions of our roads as is the well-known problem of the drinking of alcohol. Indeed, many of

these drivers are drunk with fatigue when handling these vehicles on our roads. When we remember that the men are sometimes driving in conditions of great fatigue, 25-ton lorries or coaches holding fifty or more people, it will be appreciated that this is a matter of very great importance. Therefore, I make no apology for pursuing the matter even at this relatively late hour.
We know that there is difficulty in getting evidence. It is well recognised that there is often a conspiracy between employees and employers. We know that there are drivers who conspire with their employers so as to get the extra money coming from flouting the Regulations, but there are many more drivers—so I am assured by transport workers in my own constituency, and by the many letters that I have received from transport workers all over the country since I raised the issue—who are doing these things under compulsion—under the fear of getting the sack. The problem, therefore, is of great significance because of its social effects on those concerned.
In passing, I would say, from the knowledge I now have of the widespread nature of these offences, that it would appear that almost wholly the offences are committed by small hauliers and not by the large concerns. The persistent offenders, both among employers and employees, are those connected with small firms.
The Ministry has established a system of examiners, who are enforcement officers, to see that the Regulations are observed, but it is part of my argument that the system is wholly inadequate to deter those engaging in these offences because there are far too few enforcement officers. The Eastern Area, which covers a great area of the country, has only seven examiners charged with enforcement duties, but the number of goods and public service vehicles there means that each of those seven men has to enforce the law in relation to more than 10,000 vehicles—a completely impossible task. Over the whole of the country there are 120 examiners, and each responsible for seeing to the conduct of the drivers and employers concerned with over 11,000 vehicles.
It will be seen from those figures that the system is at present completely inadequate to deal with this problem. I


am not suggesting that the examiners are failing in their duty in any way. In the Eastern Area, they obviously work very hard and, within the limits of their numbers, extremely effectively, because last year they each had an average of 176 convictions to their credit. That clearly means very hard and arduous work on the part of each of them.
When the examiners do get offenders convicted, we discover another factor which is a very great source of weakness. The magistrates' courts are, in the main, treating these cases in a completely casual and routine fashion, and are imposing penalties that are really derisory. During 1958, there were 1,236 convictions in the Eastern Region, in only 29 of which were the offenders fined more than £3. That means that 1,207 had inflicted on them a penalty of less than £3. That type of penalty can, in fact, only be called absolutely derisory. One of the objects of this debate is to try to bring to the notice of magistrates the effects of the casual treatment they are giving in the consideration of these offences. What they are doing by awarding these derisory penalties is to let loose death upon our roads, making our already dangerous roads a far greater menace than they need be.
The best deterrent against a continuance of practices of this kind is far higher probability of detection. That is recognised in relation to penal law by all penologists. The greatest deterrent is not necessarily the amount of punishment but the probability of the detection of the offence. The same thing applies in this case. What we ought to seek, first of all, is a far higher number of examiners engaged in this matter of the enforcement of the law. Do not let the Ministry think in terms, as it is doing now, of a possible 150 examiners for the whole of England and Wales. Let them set their sights far higher, recognising the very serious importance and urgency of this matter, and put sufficient examiners on the road to increase the probability of detection.
The second suggestion I make is that the Ministry might establish its own inquiry in order to assemble the facts and, having assembled the facts, then engage in a campaign to publicise them with a view not only to educating the magistrates to the importance of their

duty in these matters but educating the public also. The public can be a good watchdog if it really understands the need for effective action.
I have put these points as briefly as I can and I shall now conclude, because I want any of my hon. Friends who wish to contribute to this debate to have a few minutes in which to do so.

11.7 p.m.

Mr. Ernest Davies: I am sure that the transport workers in the constituency of my hon. Friend the Member for Norwich, North (Mr. J. Paton) and in the country as a whole will be very grateful to him for raising this matter, and in the few moments available to me before the Parliamentary Secretary replies I should like to support him.
I do so because this matter has been raised in the House on many occasions since 1953 when denationalisation brought about this deterioration in the conditions in the industry. The fact that it has to be so frequently raised is a serious reflection upon the working conditions in the road haulage industry. Every time this matter is raised I get considerable correspondence confirming the fact that workers are driving considerably longer hours than they are permitted under the statutory Regulations and they are forced to "cook" their log sheets to get away with it. If they do not fall in with the wishes of their employers they are confronted with dismissal.
Only this morning I received a letter, following some references in the weekend Press to this matter. My correspondent, who is a lorry driver, who asks that his name shall not be disclosed, says:
I can say how right you are that the fear of the sack has been well and truly restored for long distance men. If you don't want it you can get out. That's what one gets from the boss nowadays.
That is only one of numerous letters which I have received in the last few days.
The reasons why the bad conditions continue are, first, the excessive competition in the industry; secondly, the ineffective enforcement to which my hon. Friend has referred; thirdly, the inadequate penalties which are imposed—


derisory, my hon. Friend called them—and fourthly, the bad working conditions.
Since the private road hauliers after denationalisation have shown how unscrupulous they are in honouring the law, the only way they can be deterred from carrying on these nefarious practices is to put into them the fear, first, that they will be found out—which means adequate enforcement and an adequate number of enforcement officers—and, secondly, that the punishment will fit the crime and be heavy enough to affect their business. Only if their pockets are affected will they refrain from working their drivers to the point of endangering the public on the roads and, at the same time, bringing about such poor and deteriorating conditions in the industry.
It is ridiculous that there should be only 100 examiners or enforcement officers for more than 1¼ million vehicles. How can the Parliamentary Secretary possibly regard that as adequate to cope with the situation which has developed on our roads? The hon. Gentleman knows very well that, if he meets lorry drivers in any of the transport cafés. each one of them will be able to tell him either of his evading of the law himself or of his colleagues' doing so. They make no secret or mystery about it. Everywhere one goes to talk to people in the industry it is admitted that this is going on. Yet the Minister refuses to face the facts. He denies in the House time and time again, with the utmost complacency, that conditions are any worse than they were. Everybody but he knows that they have deteriorated considerably.
We on this side of the House are compelled to ask whether the Government are taking this state of affairs seriously. Is it their intention to try to bring about an improvement so that this breaking of the Regulations will be stopped? If it is not, there will be some very serious accidents on the roads resulting from excessive fatigue and the loss of full control of vehicles by the drivers at the wheel. There have already been some very serious cases. I assure the Minister that many people in the industry are worried. They fear that, if these practices are not stopped, there will be some more serious accidents, and

for them the Government will have to take responsibility.
It is necessary for us on this side to question whether the Government, in view of their past relations with the hauliers, are seriously approaching the problem which confronts the industry, or whether they are conniving with the hauliers in order to permit these offences to continue.

11.13 p.m.

The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. Richard Nugent): This is, of course, a complaint which I have heard before from the hon. Member for Enfield, East (Mr. Ernest Davies), but the hon. Member for Norwich, North (Mr. J. Paton) is a new protagonist to me in the matter. I think that it would be fair to the House and, indeed, to the hon. Member for Norwich. North if I were to put the complaint in its correct perspective. I wish to refer to the complaints which I receive from the opposite aspect, from the employers, who complain that they have been unfairly penalised.
The Regulations place an absolute responsibility on the employer for the keeping of accurate records by the drivers, and for the drivers whom he employs keeping these Regulations with regard to hours. The result is that the employer may be, and sometimes is, prosecuted on his own, and sometimes with the driver, for offences which have been committed. Employers have complained to me, and I have received representations through Members of Parliament, that this is an unfair burden placed upon them, because it is obviously physically impossible for employers, especially the bigger hauliers, to check all the activities of their drivers all the time. The result is that employers are sometimes convicted of offences by their drivers, in spite of the fact that they may have no control over the matter, and sometimes for things which have been against the instructions of the employers. I have received these complaints, and I have——

Mr. Paton: This is a matter for the courts, and the accused's employers have the right of appeal to a higher court.

Mr. Nugent: If the hon. Gentleman will listen to the argument, he will find that I am trying to put the picture into


perspective. He has made some savage charges against the employers. He must now hear the rest of the story.
I have felt it my duty to investigate this subject very closely, because I have had these complaints which at times I felt were substantial. I have, therefore, conducted a review inside the Department as to how the law works and whether it is fair that the employer should have this absolute responsibility placed upon him for his own drivers. I can tell the hon. Gentleman that I have had to conclude as a result of the investigation that, despite the burden which is placed on employers—that is, that they may be prosecuted for their drivers' faults—the present balance is right. If the employer was not made absolutely responsible, then to secure a conviction at all would be so difficult that the law would be impossible to enforce.
Also, during the course of this review, I have heard no evidence of widespread allegations of breaches such as suggested by the hon. Gentleman the Member for Norwich, North and the hon. Member for Enfield, East. On the other hand, I am bound to say that I have heard of offences which have been committed by the drivers themselves while directly disobeying the orders issued by employers.
If the hon. Member for Norwich, North has evidence of breaches, individually or generally, he should let either myself or the traffic commissioners have them. And if a driver is asked by an employer to drive in breach of the Regulations, he can go direct to the traffic commissioners. That may be unlikely, but, in any case, in most instances he has the simple remedy of taking up the matter with his trade union and asking them to complain anonymously to the traffic commissioners. The commissioners are able to take action against an erring employer by means of what is known as the "silent check" on what the haulier does. If these complaints are made to the Commissioners they will follow them up; but what happens is that these allegations are made in this House while not being supported by complaints in practice.
This allegation of widespread infringement of the law has been made in the Sunday Pictorial. I saw an enormous headline, "Slave Drivers," and there is

supposed to be evidence of widespread infringement. It is a report of a speech by the hon. Gentleman the Member for Enfield, East, and there is the comment that there is a hot tip that he is a future Labour Minister of Transport. But an even hotter tip is that no fewer than a quarter of a million drivers, according to this article, are "slaves of the road" although there is only one specific case in support of this figure of a quarter of a million.
Like the hon. Gentleman, I have met these men, and I have seldom seen men who look less like slaves than the drivers of the heavy commercial vehicles on our roads.

Mr. Ernest Davies: Mr. Ernest Davies rose——

Mr. Nugent: I cannot give way because I want to give him a few figures.

Mr. Davies: What the hon. Gentleman has attributed to me was not a speech.

Mr. Nugent: If it was not a speech, I apologise. I am only taking what I read in the Sunday Pictorial. I accept that the vital statistics published in the Sunday Pictorial are usually published more to catch the eye than convince the mind, and perhaps this was one such instance.
It is not fair to make these broad and wide allegations against the road haulage industry. The only facts we have are the statistics we keep. In 1956, there were 6,297 prosecutions and 5,842 convictions on keeping of records. We must disregard 1957 because it was not a complete year. In 1958, there were 7,521 prosecutions and 7,071 convictions. That is an increase, I agree. On the vital matter of drivers' hours, however, in 1958 there were 3,559 prosecutions and only 3,082 convictions, showing a slight downward trend.
Breaches of the Regulations concerning hours worked by drivers are, of course, the most important aspect. The traffic commissioners, who are responsible for dealing with this, are very responsible men, quite capable of using their independent judgment about what action to take. Their reports to us simply do not support what hon. Members have said.
As the hon. Member for Norwich, North said, the object of this legislation was to protect the public from the danger of drivers who, through excessive hours of driving, are unfit through fatigue to drive. Let us consider the figures. In


1957, the number of accidents to commercial goods vehicles was 55,000, of which only 65 were due to fatigue. In 1958, when there were 64,000 accidents to commercial goods vehicles, only 70, about a tenth of 1 per cent., were due to fatigue.
Is that evidence to support what hon. Members opposite have said? These are the only facts we have. The rest is sheer supposition. There is no evidence here to support the charges, made against the whole industry, of widespread infringements. These are the facts and they simply do not support the allegations made by the hon. Member for Enfield, East and his hon. Friend the Member for Norwich, North. If their allegations were correct, these figures would be many times bigger.
I have made a careful review of the facts because I felt it my duty to do so. My conclusion is that most of the road haulage firms, both employers and drivers, do their scrupulous best to observe the regulations and that the area of infringement is relatively small. There is infringement in every class of life; it is only human to err, for one reason or another. The average driver and employer, however, try to keep the law.
These allegations which suggest that there are a quarter of a million slave drivers simply cannot be supported by the evidence. If hon. Members make these allegations, either they must support them or, if they cannot be supported, they should withdraw them. If they do not withdraw them, it is evident that the only basis for them is the political conviction of hon. Members opposite, which is against the independent road haulage industry, and which they wish to nationalise; before nationalising it, they set out to damage its reputation.
I say with all the force I can that that is most unfair. The facts simply do not support the allegations which have been made. If the hon. Member for Norwich, North—or drivers—can cite cases, I have explained how they can proceed without any danger to the drivers' jobs. The traffic commissioners, however, simply cannot give me instances of such cases coming to them. The fact is that hon. Members opposite start out with the conviction, and the hon. Member for Enfield, East has attacked us again and again, saying this is a widespread allega-

tion, but when it comes to producing the evidence it simply is not there.
The establishment number of inspectors is 100, and I have said that we shall add 50 to it as soon as we have elbowroom with our driving examiners. I announced today that we have added a further 17 to it, and I hope that it will not be many months before we have added the full 50. We have looked at the matter carefully and I think that that is enough to get reasonable enforcement of these Regulations. But it is quite wrong to set out with the idea that the average person in this country, whether in this sector of life or any other, is a deliberate law-breaker. People are not. They are just as much trying to keep the law as hon. Members on either side of the House. We are a law-abiding community, and I am not prepared to embark on the approach advocated by the hon. Member for Enfield, East—that we should put fear into the haulage industry generally and that it should be our policy to bully the people in it so that they will conform with some line which hon. Members opposite think appropriate.
I am satisfied that the average haulier and driver try to keep the law and that it is only on the fringe that offences have occurred. With the present strength of enforcement officers and the additions which we are making to it, I am satisfied that there is sufficient supervision to get a reasonable degree of observance. The whole of this charge which the hon. Member for Norwich, North has now made, and the hon. Member for Enfield, East continues to make, is really based on a complete fiction. They should support it or they should withdraw it.
As to the penalties, I accept that sometimes they are not all that they might be, but the hon. Member for Norwich, North may have noticed that the other day a penalty went as far as £20,000.

Mr. Paton: One case.

Mr. Nugent: Well it shows that the court——

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-seven minutes past Eleven o'clock.